Investing in real estate can be a very smart financial decision with the right planning. Real estate has been proven to constantly appreciate in value overtime and offers great tax advantages at the end of the year. However, in the current market, you may be scared to jump in head first.
In this blog, we compiled a list of a few types of real estate investments you may want to consider, and some things you should consider before you invest.
Types of Real Estate
When investing, there are several different routes you can take. You can purchase residential properties, commercial properties, or raw land.
Residential real estate includes anything from a single-family home, condo, or apartment complex. The obvious option when investing residential real estate is the option to rent it out and be a landlord. Residential properties generate passive income and can greatly grow your investment portfolio. You can generate extra cash on top of paying the mortgage of the home.
Another option when investing in residential real estate is turning the property into an Airbnb or VRBO. This would give you quick, passive income. The only downside is you may not always have a guest staying in the property.
If allowing others to live in the home is not what you envisioned, you could even flip the home and sell it for a higher price. Flipping and updating a home increases the overall value of the property, and once it is sold, you are no longer responsible.
Commercial real estate includes a business space that is either rented out or leased by a business. This could be anything from a space in a strip mall to an office building or unit. The business would pay the wonder directly each month for the rent price. With commercial real estate, most tenants sign a lease longer than 12 months, providing security for more than one year at a time. This is a great source of passive income, but it may take longer to fill the space than it would with a residential space.
Investing in raw land allows you to decide the future of the property. You can choose if you want the space to be residential or commercial and have full control over what the property looks like overall. However, this investment requires a lot of product market research and large amounts of capital up front.
Things to Consider
The first step when picking which type of investment is best for you, is considering the following:
What goal are you hoping to achieve? Do you want long term tenants that pay you for a year and potentially move out, or would you prefer to flip and sell the property for a profit quickly? What is your end goal for this investment?
What is the local market demand? If your local demand is not high for rental properties or commercial leases, maybe it would be better to consider purchasing raw land or looking into other investment opportunities.
How much are you willing to risk? Investing always poses some risk regardless of the property. Taking on any investment can turn into a burden quickly without the property research and strategy. Be sure to look into all options and create a business plan.
What is your financing method? How are you going to pay for this property? Up front, you will have a down payment involved. You should also consider the possibility of your tenants moving out or being evicted, and have money set aside for emergencies. At the end of the day, the property is yours, and the mortgage will always need to be paid.
Investing in real estate has many pros and cons, but ultimately, it will usually pay off in the end. You can create an extensive portfolio and maybe even be able to live off the properties’ generated income after some time.
If you live in Anderson or Greenville South Carolina and you’re ready to start investing, call David Locke with Locke and Key Associates at Keller Williams Western Upstate! He is ready to help you on your real estate investment journey.
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