Updated: Jan 22
There are multiple ways of investing in real estate other than the classic residential properties.
Real estate is becoming increasingly popular. It's also quite profitable in today's housing market. The key to real estate investing success is to invest in the right type of property.
Before you begin, you should understand the various types of investments and the categories into which they fall. Physical real estate investing refers to the purchase of land and physical structures. REITs and crowdfunding are the other two categories.
Once you've decided on the type of real estate investment you want, the next step is to look into the different types of properties to buy. Check out our list below and get started.
The most well-known and well-understood type of real estate investment is residential real estate. This can include single-family and multi-family homes, as well as condominiums. Short-term rental units and vacation homes are also becoming increasingly popular.
Residential real estate investments are typically active, requiring significant monetary and labor efforts on your part, but they have the potential to provide significant returns and consistent cash flow.
Investing in residential real estate can take several forms. You buy a house and rehab it for a quick flip and profit. This method is suitable for first-time real estate investors.
The other option is to invest in properties that can be rented out. In the long run, this method is more profitable because you pay yourself back through rent. You'll get those profits if the right time comes to sell.
Commercial real estate refers to non-residential real estate investments. Hotels, warehouses, offices, and retail businesses are all examples of commercial real estate investments. These are also known as active investments because they involve the investor owning and renting a facility to a company that will use it. You can generate additional cash flow by collecting rent or selling the property when its value rises, just like you would with residential real estate.
Investing in commercial real estate entails more responsibilities and liabilities than investing in residential real estate. For large properties such as shopping malls and office buildings, it is common practice to have an onsite management team.
Raw land is a type of real estate investment that is purchased for the purpose of developing commercial or residential property. It is probably the least desirable way to get started in real estate investing. It can take years to turn a profit on raw land purchases. The structure must first be constructed. Following that, you must enter into an agreement with the tenants.
Understanding the complexities of how to begin investing in real estate with raw land requires a wealth of knowledge. You'll need to understand legal requirements, permitting, and building. Also covered is how to market your concept.
Many responsibilities come with real estate investing. The most important is who will manage the properties and how they will be managed. Another factor to consider in long-term real estate investments is management.
If you own property in the Chicago area, we provide exceptional property management services. To learn more about the services we offer, click here.