There are three major property types that real estate investors or landlords may want to own and specialize in: vacant land, residential properties, and commercial properties. Depending on a few factors like your location and the value of the properties in your area, one of these types could afford you a larger return on your investment. If you're looking to get into the real estate business, here's what to know about each type of real estate property.
Key Takeaways
- There are three main types of real estate properties: vacant land, residential properties, and commercial properties.
- Vacant land allows you the opportunity to either build something or lease it out.
- Residential properties usually consist of single- or multi-family houses, both of which you could own and rent out for a profit.
- Commercial properties consist of both land and buildings, usually used for businesses and office space.
Vacant Land
Vacant land can be used for farms, ranches, residential, or commercial properties. If you're looking to buy and rent, buy and build, or buy and sell vacant land, there are a few things to consider.
Property sizes and prices are typically quite large, and real estate agents usually get a corresponding commission. For example, in Newburgh, New York, buying vacant property and rehabilitating it usually costs between $50,000 and $500,000.
Note
Depending on your location, vacant land may be difficult to come by, or it may be further away from the city and your office.
If you're looking to invest in vacant land purchased with the intent of development, check on its water supply. You may have to have the land inspected within a certain time frame, too, such as six months. The listing and transaction process is significantly simplerandthere are no structural inspections, floor plans, or insurance issues to address.
Residential Properties
Residential property is by far the most popular with both new and experienced real estate investors. Residential properties consist of single- or multi-family houses, vacation homes, duplexes, condominiums, and more. They can be new construction or existing homes for sale.
As a real estate investor, you may be able to buy a home at auction for a good price. If you're able to acquire the property for a low dollar amount, you may be able to invest more in it before renting it out or selling it for a profit. You can usually find information about properties for sale at auctions on your state's website, including information on the date of the auction, minimum bid, maximum bid, and previous properties sold.
Condominiums are also a good option if there are any in your area. You may be able to start out owning one and renting it out for additional monthly income. Eventually, you may be able to own a second or third.
Note
Residential properties can be good investments, but make sure you track the market. Home prices can fluctuate greatly, and the higher a property costs, the less return on investment you can get (at least in the short-term).
Commercial Properties
Commercial properties can be empty land zoned for commercial useor existing business buildings.
Commercial property valuation requires a more complex accounting method includingincome potential of the property, historical revenue, cash flow with owner perks removed, and much more. Withoutextensive business valuation experience, it's better to enter this specialization carefully and after building experience in the undeveloped land or residential property sectors.
As far as office buildings, supermarkets, shopping malls, industrial, gas stations, and other commercial property types, it's a more complex business, but incomes are better if you're good at it. Sub-niches, such as only investing in strip malls and shopping centers,are also common.
Frequently Asked Questions (FAQs)
How can you invest in real estate without buying property?
If you're looking to get into the real estate investing game, but do not want to be a landlord or property owner, you can invest in real estate investment trusts (REITs), real estate exchange-traded funds (ETFs), or stocks of real estate companies.
What does a property manager do in real estate?
A property manager oversees the operations of a property, from answering tenant questions to collecting fees and rents. The property could be residential or commercial property.
