Your Guide To Real Estate Property Types
TL;DR - Each real estate property type comes with certain advantages, but you’ll want to pick one and stick with it for a while.
So, you want to get into real estate investing? That’s great news! But where do you even start?
Before you do anything, it’s essential to choose the real estate property type you want to focus on before you do anything. This is a crucial, can’t-miss step.
Your Guide to Real Estate Property Types
Why?
You’ll be hard-pressed to get a money lender without establishing your expertise with a specific real estate property type. Lenders want to make sure that you can take the money they give you and make it back. If you’re trying to invest in five different property types, a lender would assume that you’re all over the place or inexperienced.
Deciding early which real estate property type you want to focus on is a great entry point into real estate investing, and you won’t be spreading yourself too thin, learning too much at once. Instead, you’ll gain insight into a specific market of real estate investing, which you can use later on if you ever decide to switch real estate property types.
Do you want to make money? By specializing in a specific real estate property type, you’ll acquire real estate knowledge and skills at a quicker pace. Figuring out negotiations tactics, market competition, what to look for in an investment, will all come easier to you. That means a faster path to money. And we all like money.
All that being said, let’s get into the different real estate property types you can choose to invest in.
Asset Class Or Property Type?
An asset class is a group of investment types with similar characteristics, and therefore, they perform similarly in the marketplace.
Real estate is categorized as an “alternative” asset class - differing from the likes of the more traditional stocks and bonds.
So, you’ve decided to invest in the real estate asset class.
Within the real estate asset class, there are different property types that you can choose to put your money into—properties like single-family homes, condos, and the like.
Some people confuse asset class and property type, so hopefully, this cleared that up for you.
Now you need to know the different types of properties available for you to invest in.
Real Estate Property Types
The different real estate properties you can invest in fall under one of three categories - residential, commercial, or land.
Residential
This type of real estate is made to be lived in. Homes and the like.
You can rent out residential properties while you’re waiting for them to appreciate in value - when you can then sell them for a profit.
Single Family Homes - Good appreciation and cash flow, less turnover than multi-family homes. COVID has made this property type one of the most sought-after as people are looking for more space to work from home and a backyard for family and pets.
Small Multi-Family Homes (4 units or less) - Bring in good cash flow because of multiple renters, mostly bought through non-recourse loans, very sought-after properties.
Condos - Have shared access to common areas (such as pools, athletic areas); units are owned by one individual, multiple residents, and multiple units.
Townhomes - Share walls with other homes, single-family, usually have an outdoor area and access to common areas.
Co-ops - Owners purchase shares in the corporation that owns the residence, residents get a specific unit in the building.
Commercial
Commercial properties are mainly focused on generating income and cash flow.
Multi-Family Homes (5+ units) - Multiple renters results in good cash flow, hire a property manager to take care of repairs, very sought after.
Hotels - Heavily impacted by the economy, can adjust room rates in accordance with market demand.
Retail - Strips malls, restaurants, shops, you name it. Can buy retail centers with many tenants or host a name-brand store, like Walmart.
Self (Public) Storage - The storage units you see on the side of the highway. Rent areas to tenants month-to-month for storage can range from lockers to rooms to huge areas for vehicles.
Office - One or multiple tenants, buildings, and skyscrapers, value is heavily tied to location and condition.
Mobile Homes - Buy the land and rent pads to tenants; turnover and maintenance costs are both low.
Land
As you’d guess, land is open space without any buildings on it. You can build any of the previously mentioned property types on it or hold on to it and try to flip it in the future for a profit.
Brownfield - Previously developed, requires clean up before it can be built upon.
Greenfield - Not previously developed, easy to build upon.
That’s Not All...
In addition to the more traditional real estate property types, there are also other investment strategies that you can consider.
These are more in the realm of alternative real estate investments, but they can earn you quite a bit of money nonetheless.
Note Investing - Purchase real estate notes, then earn profit from interest payments or the sale of the property.
Short-Term Rentals (STRs) - Think AirBnB. You can rent out your property for as little as a day at a time.
REITs - Real estate investment trusts. You can earn income from real estate without outright owning the property.
Property Tax Liens - Purchase property tax debt and earn 10-12% interest while the property owner pays you back.
Syndications - Partner with multiple real estate investors. Either act as a sponsor (finding the property, securing it, managing it, with no monetary investment) or an investor. Split the profits with your partners.
Remember... Focus On And Choose One
If you try to invest in too many different property types, you’ll likely end up making zero profit, and you’ll just be making things hard for yourself.
The best way to begin investing in real estate is by choosing one specific property type you want to invest in... and then becoming an expert with it.
If you chase two rabbits, you’ll starve. So focus on one and get the loot.
How We Can Help You
Does investing in real estate sound intriguing to you? Would you like to learn more? We’d love to be of value!
At Undoor, we pride ourselves on teaching new and experienced investors how to maximize their gains with minimal stress. Our goal is to help you fall in love with real estate and real estate investing, and what we’re most passionate about is maximizing investment gains for people like you.
Do you want to get key insights and advice that’ll help you get ahead of the game? Don’t hesitate to contact us for any and all real estate wants or needs.
