Learn About the Best Real Estate Investment Types

The business of real estate connects people with a shared interest of making profits through different investment types. Before you indulge yourself in real estate, you need to fully understand the different and best investment types out there. When it comes to protecting and multiplying your money, you need to take calculated steps in investments. Being an ignorant real estate investor means only one thing: you like throwing your money away. Because we’re sure that you’re not into that kind of thing, Mashvisor provides you with the best information about real estate topics to help you spend your money on the best investments in the US real estate market.

In this article, we are going to cover four different real estate investment types and their positive and negative aspects. This should give you a good idea as an investor about which real estate investment types are suitable for you.

So, here are the best investment types in real estate:

1. Rental Investment Properties:

Let’s start with one of the most famous real estate investment types. This strategy is all about investing in a real estate property and turning it into a rental one that will allow you to earn an extra monthly income. By doing so, you will become a landlord and rent your property out to tenants for long or short periods of time.

What is important to remember about this investment type is that, as the other investment types, it has its cons and pros:

Cons:

Let’s get these out of the way before we enlighten you about all the benefits of this investment type.

Managing a property as a landlord: Being a landlord is not all rainbows, butterflies, and profits! It is a time, energy, and – yes – money consuming business. Whether you decide to personally manage your rental property, or hire a professional property management company to do the tough tasks for you, you will be paying for it in one way or another. Two main issues come with managing a rental property: the advertising (or marketing) and the maintenance.

As a landlord, you have to make sure your rental property gets a good advertisement and attracts tenants. With that comes meeting different tenants until you reach an agreement with the best ones, taking into consideration wasting as little time as possible. On the other hand, you have to take care of the house and fix all the issues that might be deal-breakers for tenants.

Expenses: However, if you decide to hire a company to do the above mentioned tasks for you, you have to cut out a percentage of your money for its service. This means that it will take you a longer time to pay off your mortgage and gain bigger profits.
You won’t gain profits immediately: Again, due to the fact that you need to pay off your mortgage first, you won’t be fully enjoying your rental income. It is a long-term investment strategy that relies on making good money in the long run.

Pros:

Now let’s explore what makes this real estate investment type excellent.

A regular monthly income, obviously!: As long as your property does not suffer from extended vacancy and lack of tenants, you won’t be losing money and will be enjoying a monthly rental income. The rental income will help cover the property taxes, maintenance costs, and the mortgage loan. Because of these costs that will be cut from your income, it is important to remember the 1% of sales price rule. This rental investing rule states that if your rental property gains a monthly 1% of the sales price, then you’re doing it right. Therefore, if your house price was $150,000, make sure you get a monthly rent of $1,500. The value of houses also plays a great role in achieving a better percentage on house rent; if the value of houses decreased, investors can achieve more than 1% of returns through monthly rents.
A gate to more investments: After you break even on your investment property and pay off your loan, you will be profiting from the percentage of money that used to be cut from your rental income for the loan payment. The extra money (the increase in the positive cash flow) can help you indulge in more investments in the future which multiplies the sources of income for you.

ADVICE: If you want to gain more income on your real estate investment, take into consideration short-term rentals through Airbnb. Airbnb is becoming more and more popular among real estate investors around the world, because it allows you to charge more money per night than any traditional rental. This means that you will be gaining a bigger profit.

Appreciation: While a tenant pays off your mortgage, your house will be appreciating in price over a long period of time. Therefore, after you have fulfilled your purpose of renting out your property and gained satisfying amounts of money on a monthly basis, you can sell your house for two or three times its original price. Not bad, ah?

This is one of the investment types that is considered a go-to strategy for many expert real estate investors.

Buying to Sell Investment Properties:

Also, another one of the best investment types we will tackle is the strategy of buying a property to sell it later for a higher price. The real estate investor in this strategy usually sells back his/her property few years later after it gains more value.

This investment type is a faster way to earn money than investing in rental properties. Another benefit of this real estate strategy is not having to deal with all the troubles of being a landlord. However, you have to bear in mind that it is not 100% guaranteed that you will be gaining profits on your investment property. There is a possibility that the property’s value will not increase that much or at all.

Fix-and-Flip:

The third of the investment types we will be talking about is the fix-and-flip strategy. The real estate world revolves around taking advantage of properties and making better returns out of them. This investment type is all about paying little money for houses that need major repairs, fixing them for as cheap as possible, making them more attractive on the real estate market, and selling them for a price higher than you bought them for. However, buyers have to be aware of the expenses they need to spend on the investment property. No one wants to lose money on properties that cost the same or more repair money than they paid when they bought the property.

Inspection expenses should be taken into consideration by the buyer as well. It is important to let an appraiser inspect the house before and after the fixing. This will ensure that the new buyers’ appraiser won’t notice any major issues that could hinder or break the selling deal.

All in all, and after taking into consideration all the expenses on repairs, you can rest assured that this investment type is the most profitable short-term strategy. If you would like to learn more about real estate short-term strategies, check out Mashvisor’s blogs.

Land Investment Properties:

The fourth and last one of the best investment types is raw land investment. Vacant land is cheaper than developed land, therefore, it is easier to invest your money in it. However, you need to choose carefully the location of that land. Observe and study the area and buy in places that show growth in businesses and population.

NOTE: When it comes to raw lands, there are low property taxes related to them. Still, you have to pay taxes, so keep that in mind as well.

To cover your property taxes, you can invest in your vacant land by establishing the following businesses in it:

1. Grow plants and sell the crops.

2. Lease the land to farmers for sheep grazing.

3. Grow trees and sell timber.

4. Build a house on it and rent it out.

There are multiple investment types out there, so it is very important that you make sure that your commitment and financial abilities suit the investment types you choose to indulge in.

Bottom Line:

Nothing comes easy, but when you follow a good plan, you seldom fail. Real estate investing can be challenging, especially that your money is on stake. However, a good real estate education in investment types and other real estate topics can reduce the stress and make investors, particularly new ones, more confidant in real estate investments. Mashvisor serves as a good school for real estate topics, so do not hesitate to explore our website to get the answers you are looking for and the ones you didn’t even know you needed.

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