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Know Your Investment Type
With the decision to get involved in real estate investing, so too comes an avalanche of information that must be deciphered before you can truly get started with your investment proceedings. To go along with the myriad of ways to finance real estate and the thousands of potential properties out there, so too exist a variety of different types of properties to get involved with, all with pros and cons. Determining just what type of investment property you’re looking for can help you narrow down this vast field of potential investment opportunities into a handful of excellent candidates.
Perhaps the most common property type that investors get involved with is rental property, particularly as a first foray into real estate investing. Though the process of being a landlord can be unrewarding at times and certainly tedious, rental properties also have the potential to pay off over the long run in a big way, though short-term profits can be low. Those that are brand new to investing should consider rental property as a way to get involved initially, even though short-term benefits can be slow.
One step up from rental properties is offering your investment property as a rent-to-own opportunity. With that opportunity comes the ability to charge a higher rent level and perhaps sell the property in the process for a profit. Indeed, sometimes tenants do not end up purchasing the property, giving you the benefit of not only having larger rent payments but the ability to subsequently list the property again. These deals can be tricky at times and should be attempted with the help of either those that have done similar deals or those with special expertise in the bookkeeping aspects of such transactions.
Commercial Real Estate
Commercial real estate is another significant step up in complication and one that many investors hope to be a part of over the course of an investment career. Commercial investment opportunities see a greater amount of competition surrounding them, making the market sometimes difficult to become a part of. That difficulty is in place because of the significant benefits seen over the low hassle and potentially high profits of renting out commercial space.
Naturally, in a poor location or poor business climate, empty storefronts can eat into those profits and tie up capital without a positive cash flow over a long period of time. Certainly, those involved in commercial investments should have prior investment experience and a strong knowledge base for such real estate transactions.
Finally, for those with the biggest penchant for risky business deals will no-doubt think about speculation as a means of real estate investment. Basically, those that participate in this practice look for property in areas that they think will eventually see a rise in property values, purchase it and then hold it until those values do rise.
The risks here are obvious as it is impossible to 100 percent predict what areas will see a rise in property values. However, for those that predict growth correctly, great profits can be seen with little effort or management. Prime areas for this type of speculation include areas around new infrastructure improvements (highways, light rail, etc.) and areas of new commercial ventures.
Decide on Your Investment Type
Deciding what kind of risk and reward you are looking for can go a long way towards narrowing down the properties in your area that are best suited for your real estate investment efforts. These real estate categories are certainly not the only types of investments possible and there may be other types that are more in line with your goals. By ensuring that you pursue real estate investments of a type you feel comfortable with, you are more likely to have a positive, profitable real estate investing experience.
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We respond right away! -Colleen Lane, Realtor®
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