Understanding the Different Types of Real Estate Investments

When it comes to real estate investments, there are a few different types that you can choose from. Each has its own benefits and drawbacks, so it’s important to understand the differences before you make a decision. Let’s dive into the basics:

Residential Property

This is the most common type of real estate investment, and it includes homes, apartments, and condos. Residential real estate investors profit by taking in rent (or regular payments for short-term rentals) from tenants, or by cashing out on equity that has accumulated (such as in a fix and flip situation where the property value rises).

Commercial Real Estate

The term “commercial property” can refer to a wide range of land uses, including industrial and commercial real estate. Industrial real estate refers to properties where items are manufactured or stored rather than sold, such as warehouses and factories. Retail space is where consumers may purchase products or services, such as a clothing store. Commercial premises tend to have longer leases and higher rents than residential properties, and the tenant is usually responsible for all or most of the property maintenance.

Raw Land

Investors can purchase raw land with the goal of developing it down the road or selling it at a profit when market values in the community increase at a later time.

Which type of investment should you choose?

If you’re thinking of investing in real estate, such as residential or commercial properties, knowing your local market is essential. If there isn’t much demand for residences or business space in your region, and property values start to decline, that investment may become a liability quickly.  Investments in raw land must also be considered carefully, as local rules and ordinances may prevent the ability to develop the land as the investor desires. 

When in doubt, talk to an experienced real estate attorney about your ideas in order to create the most profitable plan, not only for today but when you decide to sell down the road. If you have questions or need assistance, please contact us to schedule a consultation.

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