Knowledge Is Power, Understanding Types Of Real Estate Investment Properties
Real estate investment can be an excellent choice for people who want to generate income through investment opportunities. But like any other investment, knowledge is power, and in many cases, it means the difference between making profitable or costly decisions.
With the real estate market booming, investors are sorting through every available property type to find profitable investment possibilities. To make wise decisions, it is vital to know more about the types of real estate that exist to make your investment decisions that are right for your needs.
Residential Real Estate Property
Many different types of housing fall under the category of residential real estate property. Everything from single-family homes to multi-unit properties that can be rented out to tenants or sold to home buyers is considered residential real estate. This distinction includes apartments, duplexes, multi-family, and vacation homes. Tax benefits typically come with owning a residential real estate property, so you must look up your area’s tax benefits before making a property purchase.
Commercial Real Estate Property
Commercial real estate includes any business, industry, office space, or large living spaces and mixed-use properties. Some multi-unit residential complexes can fall under this category if they exceed the maximum number of units specified as residential property. This category can include hotels and motels, retail buildings, warehouses, apartment complexes, and land zoned for commercial buildings. Tax incentives for owning commercial property exist, as well as the possibility of income from rental revenue.
Land Investment And New Construction
Raw land investment and new construction represent two different categories of real estate investment that can be used to diversify your investment portfolio. Raw, or vacant land, is most attractive to purchase in markets where growth is projected to be high. New construction is similar, except the property has already been build on the land. These types of investment properties can be from start to finish or held for long-term gains. The key to prosperous land and new construction investment is extensive market research.
Real Estate Investment Trusts (REITs)
REITs own various commercial real estate types such as malls, restaurants, hotels, and multi-use properties that are almost always large in scale. As an option to owning the property in its entirety yourself, you can invest in a REIT by purchasing shares of these real estate companies on the stock exchange. In this capacity, the companies are required to return 90% of their taxable income to shareholders annually in dividends. You are also able to sell your shares of the company at any time.
Before you decide which type or types of real estate property are suitable for your investment purposes, familiarize yourself with the process of purchasing real estate by connecting to an experienced and licensed real estate agency in your area. You may also want to consult your tax accountant to ensure you are aware of the possible tax implications of your investments.