Choosing the ‘best’ type of real estate investment has no yardstick, as it varies from one person to the other; with regards to monetary capabilities, level of patience, personal interest/preference, geography, determination, and risk tolerance amongst others.
To determine what type of real estate investment is good for you, it is advisable to do a thorough review of the above mentioned requirements before venturing into any scheme. Every form of investment has its own pros and cons. Some of these investment options include Residential Real Estate, Commercial Real Estate, Raw Land Investing & New Construction, Real Estate Investment Trusts (REITs), and Crowdfunding Platforms.
Residential Real Estate
There are numerous rental property types in residential real estate, though the most common is thought to be single-family homes. Other residential properties include duplexes, multifamily properties, and vacation homes. Residential real estate is ideal for many investors because it can be easier to turn profits consistently. Of course, there are many residential real estate investing strategies to deploy and different levels of competition across markets — what may be right for one investor may not be best for the next. For this reason, choosing the right exit strategy and market is key when it comes to residential real estate.
Commercial Real Estate
The best commercial properties to invest in include industrial, office, retail, hospitality, and multifamily projects. For investors with a strong focus on improving their local communities, commercial real estate investing can support that focus.
One reason commercial properties are considered one of the best types of real estate investments is the potential for higher cash flow. Investors who opt for commercial properties may find they represent higher income potential, longer leases, and lower vacancy rates than other forms of real estate. Investors may also enjoy less competition in commercial real estate because purchasing these properties can be a larger undertaking than working with residential homes. To learn more about getting started in , be sure to read this article.
Raw Land Investing & New Construction
Raw land investing and new construction represent two types of real estate investments that can diversify an investor’s portfolio. Raw land refers to any vacant land available for purchase and is most attractive in markets with high projected growth. New construction is not much different; however, properties have already been built on the land. Investing in new construction is also popular in rapidly growing markets.
Whether you are interested in developing a property from start to finish or profiting from a long-term buy and hold, raw land and new construction provide a unique opportunity to real estate investors.
Real Estate Investment Trusts (REITs)
Real estate investment trusts or REITs are companies that own different commercial real estate types, such as hotels, shops, offices, malls, or restaurants. You can invest in shares of these real estate companies on the stock exchange. When you invest in a REIT, you invest in the properties these companies own without the added risk of owning the property yourself. Publicly traded REITs also offer flexible liquidity in contrast to other types of real estate investments. You can sell your shares of the company on the stock exchange when you need emergency funds.
Crowdfunding platforms offer investors access to several assets that offer high returns and are traditionally reserved for the wealthy. While this offers the ease of finding assets to investors, this type of real estate investment also introduces a high amount of risk. Crowdfunding platforms are typically limited to accredited investors or those with a high net worth. Some sites offer access to non-accredited investors as well.
The main types of real estate investments from crowdfunding platforms are non-traded REITs or REITs that are not on the stock exchange. In terms of non-traded REITs, your funds may be invested for several years with no possibility of pulling your money out when you need it.