Types of Real Estate Investments You Need to Know About

Investing in real estate comes with numerous and unique benefits as long as you do it right. This is one of the reasons why this type of investment has remained popular over the decades. Those new to real estate investing might be confused by the different types of real estate investments available. Before you start thinking about where to invest, here are the main types to know about.

Residential Real Estate

Residential real estate investments are the most popular and widely known type of real estate investment. Real estate investing means investing in property that people live in. There are different types of real estate investing, with the activity level (i.e., how involved you will be, and how much time and money you invest) depending on the specific type of investment you choose.

Long-term rental properties are bought for the sole intention of renting them out. These can range from single-family homes and flats to multifamily homes. These investments make you money through monthly or annual rent and their appreciation over the years.

Vacation rentals are properties you buy to rent to tourists visiting an area for a short period. These properties are very lucrative, especially with the rise of short-term rental apps. Their main downside is that they require a lot of hands-on work than other properties.

Investors can also involve themselves in flipping and microflipping. Flipping a house is buying it at close to or below market value, renovating it and then selling it for a profit. The risk with flipping a house is that you might find more issues than you anticipated which will increase the cost of the repairs and reduce profits.

Microflipping is buying property and selling it without spending money on repairs. These investments have little profit, the properties typically move fast depending on where they are located, and they do not require huge financial investments.

You can also have an accessory dwelling unit. This is a space on your property that you rent to a tenant. Converted sheds and basements can serve as accessory dwelling units, but ensure you are not breaking any laws before converting them.

Commercial Real Estate

Commercial real estate is non-residential real estate. As with residential real estate, this is a broad category that includes anything from single offices and office buildings to warehouses and industrial real estate. It also includes retail stores, hotels, and malls. These are also active investments as they have to be managed all the time, and they make money through rent and appreciation.

Commercial real estate is quite pricey to get into, but it typically has a higher return on investment than residential real estate. The appreciation of these types of properties depends on how much revenue they generate. This means that if you rent yours out to successful businesses that make a lot of money, your property might appreciate faster than a residential one.

A major downside of commercial real estate is liability. You have to worry about more things such as someone tripping and getting injured on the property or having their car smashed into while they are parked on your property.

Land

Land is just property that does not have anything on it. Undeveloped or raw land is typically much cheaper to invest in than developed land. If you know where and how to look, you can find land for as little as £10,000 per acre and this land appreciates over time much like other real estate investments. If you plan on developing the land, you can also use it as security to get a loan.

A type of land investment that has become very popular in recent years is buying woodland. This is land located in an ecological site and is perfect for those who like to like amongst trees. Buying woodland gives you lifestyle benefits as you can spend time amongst nature any time you wish. It has commercial value and is a great financial investment due to its appreciation and tax benefits.

If this sounds like an investment for you, you can talk to an expert so they can tell you about it and show you how to buy woodland. There are various considerations including where to buy and the size of the land to buy, but you can learn how to buy woodland here and get answers to any questions you might have about this investment.

Real Estate Trust Investments

A Real Estate Trust Investment, REIT, is one where a trust oversees physical real estate. Investors pool money to buy properties and are paid a percentage of the profits the properties generate. REITs are passive investments because the trustee takes care of everything for you. There is also little risk on your end unless there is a massive market downswing.

You also get to benefit from property appreciation. As the property appreciates, how much it generates is likely to go up and investors benefit from this. You can invest in REITs involved in residential real estate or those investing in commercial real estate.

The latter are typically listed on stock exchanges because they are larger, publicly traded companies. This means you can also invest in their stocks if you like and benefit twice from their positive performance.

Depending on how much you invest and which REIT you invest in, you can expect a sizable and regular income. These types of investments also give you a lot of liquidity unlike other types of real estate investments.

Since you have no control over which types of properties the REIT invests in, you also have little control over how much you make from it. REITs are also considered long-term investments that yield you an increasing amount of money over time.

Real Estate Crowdfunding

This is a new way of investing in real estate and is very similar to REITs. Investors pool their money and then find investment opportunities themselves. These investments require little upfront investment and are passive too.

There is no shortage of investment options for those who would like to invest in real estate. Each type of real estate investment has pros and cons so it would be a good idea to do some research and due diligence before investing.