For a lot of people, investing on the real estate properties is a wise decision; it is straightforward, easy to understand and it incorporates a reasonable transaction between the owner and the user. On a condition that the cash flow is steady and rent is on time, then there is really no issue. However, you will be surprised that investing on real estate is quite complex. There are different types of investment that you have to consider from commercial, industrial to residential. Let this guide help you on your journey.
Real Estate Investment 101
As a real estate investor, your primary goal is to make use of your money today and allow it to grow to be financial stable in the years ahead. The profit that you make should be enough to cover the risks that you are taking, the expenses related with being an owner and the amount of taxes. This article will explain to you the things that you should expect when investing on real estate.
Types of Real Estate Investment
There are basically 8 types of investment on real estate that the investor should understand before plunging in this industry. Leaseback transaction, mortgage lending, REITs, retail, mixed use, industrial, residential and commercial real-estate have their own drawbacks and advantages.
- Residential- This type of investment involves properties such as vacation house, townhouse, apartment, houses and any type of properties where the renter will pay you in order to reside in that property. How long will they stay will be based upon your agreement which is called lease agreement. In the US, most lease agreement will extend up to 12 months.
- Commercial- These are skyscrapers and office building. Investing on commercial real estate requires a huge investment. You will have to build a structure with divided office space that you can lease out to business owners. But ultimately, this will result to a more stable cash flow.
- Industrial- This can include distribution center, storage units and warehouse. It is a type of investment that comes with excessive fee and improved ROI.
- Retail- This involve retail storefront, strip mall and shopping malls. In other instances, the owner will receive a fraction of the revenue made by the retail store. This commission would be separate from the monthly fee. This money can then be used to maintain the property on their best condition.
- Mixed Use– This is a combination of the different real estate investment made above. This type of investment is popular among investors with large assets.
In case you are planning to invest on the real estate, you will need to be aware on how to keep your money safe. You are probably thinking on the best type of investment that can give you the best ROI. Unfortunately, there is no concrete answer to this. The key in finding a success in the world of real estate investment is to understand the appropriate way to store your cash until such time that you will need it to invest it on the real estate.