If you play your cards right, real estate investing can be extremely profitable – that’s why it’s considered one of the most popular assets. However, dipping your toes in can be a little scary if you're unfamiliar with the real estate world.
Here at Bluewest Properties, we know that it can be overwhelming to learn about the different types of real estate investments. Before you throw your money at something, we’ll break down the different types of real estate investments so you can decide what option is best for you.
What Are the Different Types of Real Estate Investments You Can Buy?
When you think of different real estate investments you can get your hands on, you might immediately think of purchasing a rental property or a fixer-upper house. There are many more options, though!
Residential Real Estate
Residential real estate is one of the most common types of real estate investments. They’re usually active investments, meaning they will likely require significant monetary and labor contributions from you. However, they can potentially bring in big profits and continuous cash flow.
There are several types of residential real estate investments to choose from, including:
- Long-term rental property - This is a piece of property you purchase to rent out to tenants. It can be a quaint, single-family home, a spacious multifamily home, or anything in between. You’ll make money from this investment by collecting rent from tenants and appreciated property value (when you decide to sell the property).
- Vacation rental - Similar to a long-term rental, vacation rental properties are rented out to visitors, but they’ll stay for a short period. This could require more work than a long-term property because it will require maintenance between guests.
- Flipping - Flipping a house is an active investment. You purchase a fixer-upper property, make repairs, and then sell it again. House flipping can be risky because you have to invest a lot of money into repairing the property. Still, if all goes well, you can make a hefty profit.
- ADU (Accessory Dwelling Units) - ADUs are extra living spaces you rent out to tenants on your property. Common examples of these properties include guest homes, FROGs (finished rooms over garages), tiny houses, and mother-in-law suites.
Commercial Real Estate
Commercial real estate investments are nonresidential properties. This could include hotels, warehouses, office buildings, retail stores, etc. Usually, these investments are active because they involve managing the building and renting the space out to tenants. You’ll earn money from commercial real estate by collecting rent or selling the property when the value appreciates.
Raw land is a piece of property that has nothing on it. We mean nothing – no buildings, paths, crops, etc. Undeveloped land like this tends to be cheap (compared to developed land) and usually appreciates over time. Often, raw land investors lease the property to farmers or sell it at a higher price to developers.
REITs (Real Estate Investment Trusts)
REITs are companies that operate as trusts and oversee various real estate investments. These are passive investments since you can invest in a REIT and generate income from the properties managed by a company – rather than owning the property yourself.
Real Estate Crowdfunding
Real estate crowdfunding is a relatively new method where investors band together to pool their funds and invest in real estate opportunities they would otherwise be unable to afford on their own. This process is usually done online or virtually. This investment typically involves significantly less money upfront and is considered passive.
What Are the Best Real Estate Investment Properties for New Investors?
So, now that you’ve learned about the overarching types of real estate investments, you’re probably trying to decide which one is right for you. Some properties will likely make money more quickly or require less money upfront – making them more appealing to new investors.
Here are some of our recommendations for the best real estate investment properties for new investors.
Single-Family Homes Near an Elementary School
Young families are always looking for houses in family-friendly neighborhoods with good school districts, so investing in single-family homes near a highly-rated elementary school is a reliable long-term investment. Plus, the tenant turnover is usually lower than average for families with school-aged children.
Condos Near Colleges or Universities
The demand for housing located near colleges or universities is always high. Most rental properties do exceptionally well when they’re within walking distance of campus or the main attractions in town. You can choose from studio apartments to large houses to host more students. Turnover might be high with this investment, but you can almost always expect to make a steady income every month.
Real Estate Investment Trusts (REITs)
REITs are a fantastic option for first-time investors because it doesn’t include actively buying or managing a property. As an individual investor, you can purchase shares and earn dividends from real estate investments that a larger company operates.
Airbnb or Other Vacation Rental
What’s great about an Airbnb or vacation rental is that the property can be anything from an expansive beach home to a bungalow in the woods. It’s best to invest in touristy or rural areas where guests can escape from their everyday lives. You can earn income from charging a high price per night, but you will have to spend money on maintenance and frequent cleaning costs.
Take the Leap With Bluewest Properties
It's time to begin your journey to financial freedom and invest in real estate. We know the process can be overwhelming, so we're here to help. Our team at BlueWest Properties is composed of experienced real estate agents that will work diligently to find you the perfect property. Give us a call to get started!