The real estate industry is an ever-growing market. While the industry took a hit during the pandemic, it has found its feet again, reaching $370 billion and is expected to grow at an annual growth rate of 3.72% till 2025. With such incredible growth, now is the perfect type to invest in the business. However, investors must know the types of property investments they can dabble in before committing.
Below, we discuss the different property investment types and the pros and cons of each of them. Read more to determine which property investment is the best choice.
What is an Investment Property?
Before divulging information on the types of property investments, you must first understand what an investment property is.
An investment property is real estate that you purchase to earn an ROI. The ROI depends on how you use the property, either through a rental or resale income. While investment property is a term that refers to any form of a physical asset that you own to later profit from, the term is widely used for real estate.
For real estate, the investment can either be long or short-term, with investors investing in the property to ensure that they earn a decent profit. Moreover, investment properties vary based on different real estate industry sectors. Hence, investors must decide based on the types of property investments they are aiming for.
Different Types of Property Investments
The residential market is a vast industry that offers many investment opportunities. Hence, you must understand the types of property investments to choose one that suits you.
Residential Property Investments
Residential properties are the largest real estate in America, comprising single and multifamily homes. Moreover, residential properties are ideal for investors as they quickly turn into profits. However, investors should know about different strategies to deploy in different markets. For most, an experienced real estate agent is usually helpful in buying or selling a home.
Different types of residential properties include:
- Single-Family
- Duplex
- Multifamily
- Apartments
- Vacation Homes
Even in residential real estate, investors might be interested in several types of property investments. Some of these types are:
1. Buy-to-Let
These types of property investments consist of residential and student buy-to-let. Buy-to-let properties are those that investors purchase and let out to tenants for rent. The main difference between residential and student is that the student buy-to-let involves a group of people renting the same property, while residential buy-to-let usually consists of families.
Both types of property investment offer an RO through rental income or by selling it later and getting a capital appreciation.
2. Off-Plan
These types of property investments consist of buying a property before it is completed. This is a popular investment type in real estate as it offers a below-the-market price and a more significant cash appreciation.
3. Houses of Multiple Occupancy
Houses of multiple occupancies (HMOs) consist of buying a home with numerous rooms and renting each room out individually. While these property investments are primarily geared toward students, they are also popular with other target groups.
4. Flipping
Flipping houses is a real estate strategy in which the investor purchases a home, makes renovations, and sells the property for a profit. This type of investment is less popular than the rest with investors because it only offers an ROI through capital appreciation and requires in-depth real estate knowledge.
5. Vacation Lets
These real estate properties are let out to people on a short-term basis, mainly for those on vacation or a holiday. Hence, your ROI differs depending on the season and the area.
Commercial Property Investments
Commercial real estate offers a range of investment opportunities and consists of properties rented by businesses and companies. While the purchase and maintenance cost is higher than for residential real estate, these types of property investments offer a greater return, mainly through higher rent. Different types of commercial properties include:
- Industrial buildings
- Warehouses
- Hotels
- Banks
- Offices
- Retail Stores
Moreover, commercial real estate has a longer lease than residential, so it offers investors a more stable and long-term income. There are several ways of investing in commercial real estate, and two of the most common include:
Real Estate Investment Trusts
Real Estate Investment Trusts (REITs) are businesses that own real estate and allow you to invest through stocks. This reduces the risk of investing significantly and offers a steady investment opportunity. Moreover, REITs provide greater liquidity than other property investments, as you can sell your shares on the stock exchange.
Crowd Funding
Crowdfunding offers investors an opportunity to invest in real estate through nontraded REITs. While the ROI is significantly more significant, it also brings considerable risk and means that you might not be able to liquify your assets for several years.
Raw Land Property Investments
One of the most popular types of property investments is raw land. These properties consist of unoccupied lands without any development. You can also invest in new construction on raw land. Raw land property investments are less invested, mainly because many investors are not as familiar with them. However, they offer excellent ROI and long-term income. Different types of raw land include:
- Vacant Land
- Working Farms
- Ranches
Which Types of Property Investment are Best For You?
The types of property investments depend on several factors. Mainly, they rely on how much you want to spend at first, how much ROI you want, and how long you are willing to wait. If you want a steady and long-term income with stable ROI, then residential or commercial property investments might be better. However, if you want to take risks for more significant ROI, you can invest in raw land and new constructions.
Get Help With Property Investment
To invest in real estate, you must have an in-depth knowledge of the types of property investments, the market, and the strategies you can employ to minimize costs and maximize profits. If you do not have such knowledge, it would be helpful to have someone who does.
Robert DeFalco Realty has many trained and experienced real estate agents with the necessary knowledge and skills to help you with your investment opportunities and plan a strategy to get the most ROI.
Call Robert DeFalco Realty at 718-987-7900 or visit the office in New York. Alternatively, you can fill out a form online and have an agent get back to you.
