Residential Real Estate
Residential real estate includes single and multi-family residences that have less than five individual living spaces. This includes homes, condos, townhouses, mobile homes, duplexes, triplexes, and quadplexes. Besides buying a home to live in, people commonly invest in residential real estate as a long-term rental, as a vacation rental, or to fix up and sell (also known as flipping).
Long Term Rentals
Investors buy this type of property intending to rent it out to long-term tenants. The number of units or living spaces on the property would determine the number of tenants the investor would rent out to. The investor makes money through rental income and gains equity if the property increases in value, with the opportunity to sell the property in the future and make a profit.
Vacation Rentals
As an investor, owning a vacation rental is similar to owning a long-term rental property, but instead of tenants, the rentals are short-term visitors. One major difference is vacation rentals need to be furnished while long term rentals can be furnished or unfurnished. Vacation rentals also usually require more input from the owner due to the management and cleaning of the property between guests. However, vacation rentals stand to make a sizable profit, depending on the location of the property and the time of year.
House Flipping
When an investor buys a home to fix it up and resell it for a higher price, this is known as flipping. House flipping requires lots of input from the investor. Not only is there a monetary investment involved, but the time investment can be large as well.
Commercial Real Estate
Non-residential buildings like offices, hotels, and malls can be profitable investments. The investor typically owns the building and rents out spaces to businesses. While the upfront investment is usually higher than a residential property would be, the return on investment is typically higher as well.
Industrial Real Estate
Industrial real estate is similar to commercial, except the buildings usually consist of more factory and warehouse space than retail space. The investor has a similar involvement in industrial real estate and commercial real estate — they would own the building and rent the space out to businesses that needed industrial facilities.
Investing In Raw Land
Buying property with nothing built on it can be a tricky investment. While the initial investment tends to be cheaper than buying developed land, the cost of building can add up quickly. Keep in mind that raw land isn’t able to turn a profit right away, so planning is important.