Investment is one of our main sources of money from time to time. It has been advised by many financial advisers and experts to invest so that your money will grow remarkably and give you a pleasant and long-term process for your retirement. That being said, real estate investment is one of them.
Real estate refers to properties that relate to land, structure, or anything on it. It may be a building or just raw land. These properties are often leased to investors or businesses. When you invest in real estate, you’ll enjoy and reap the rewards of passive income and a stable cash flow. But that’s only when you invest in the right one.
In this article, we listed down the five types of real estate investments you should know about:
These properties include houses, apartments, condominiums, vacation homes, etc., where a person or group of people can live on it and pays you for staying. Most people think of this first when they’re talking about real estate investments. You can make money on it by having it rented depending on how long their stay is. While most residential leases in the Philippines are on an annual basis, some are having them monthly or quarterly.
What are the Benefits of Investing in Residential Properties?
This type of real estate investment gives you a regular income and can maximize your capital. Familiarizing yourself with the market will be a great help. Since there are tax benefits in owning residential properties, it’s best to check those out to help you in your business. Knowing what’s the best and profitable terms in your area can help you maximize your profit.
Urban cities or towns with schools most likely earn a higher income because of the demand that is always high in those areas. Analyzing what type of property in your city will give you the upper hand when looking for tenants. Condominiums and boarding houses will be great when you’re near universities. Single-family homes and apartments will be excellent in urban areas. A vacation house will do great when your location is near a tourist spot or a breathtaking mountain. A multi-unit property can be sold to homeowners too.
The handling of tenants might sound tedious and frustrating. The property could also be damaged due to the tenants. However, it can be managed with the right contracts and agreements. It also needs a lot of patience to handle the tenants, but considering the amount of money you’ll earn and the regular cash flow, it has been the most common real estate investment.
Mostly consists of buildings, skyscrapers, and spaces for businesses, commercial properties can give you greater stability of profit and cash flow due to the long years of leases of companies. This has been a great advantage of having a commercial investment over residential.
Saving up and creating a small building with a decent amount of offices, you can have it rented out for companies and small business owners that will pay you to use the place. Or you can instead buy an old building, refurbish it and have it leased, which might do good as well.
Commercial properties deal with the correct area to maximize their profit. With proper and extensive research, you can choose the right location that will give you a lot of profit. Buildings for businesses like food stalls and groceries, for instance, will do great in towns and cities, while large skyscrapers will be suitable for large companies in the city.
Warehouses will do great in places where traffic is light and near suppliers, producers, and markets. Hotels will be just perfect near tourist spots or even in cities. The key to gaining more consumers lies down on the ideal area you’ll choose. Whether there are businesses around it or availability to the site, narrowing down all the factors will help you pick the perfect location.
Full and ongoing management are needed when you own commercial real estate. You can employ a commercial real estate firm to help you find, manage, and retain tenants. They can also help in making leases and financing options that will help your property upkeep and marketable. Because these commercial real estate management companies have specialized in the field, they are also helpful in terms of rules and regulations for having such properties in different places, industries, and sizes.
What are the Benefits of Investing in Commercial Properties?
Just like residential properties, you can earn money by having your commercial property occupied for businesses and collecting fees from them. Since the investors typically have multi-year leases for the long run, it will provide you with more excellent profit and cash flow stability. The fees are normally dictated by the state or market.
Although the markets can fluctuate, it is hard to raise commercial property rates since it is common to have multi-year leases with your investors. And that goes vice versa. When the market plunges, you would not need to lower your properties’ price until the end of the contract if it is still low by that time.
3. Raw Land
This refers to a piece of land that has not been developed for construction. Investing in raw land is for investors who can wait for developments. If you want an immediate income stream, this investment is not a good idea.
Raw land appreciates because of two reasons: limited supply and growing demand. Since there is a limited amount of available undeveloped land and an increasing population, the property’s value will firmly increase.
What are the Different Types of Land Investments?
There are various types of land investment, which you can select. It also takes time and effort to know how to utilize your raw land. Here’s an overview of the different types of land investments:
Row Crop And Livestock Land
This type of investment can be trickier than other land investments because it requires real estate and agricultural industry knowledge. Row crops are land-based commodities like corn, potato, buckwheat, soybean, and sunflower.
Row crops also have various risks, like any traditional investment. These risks include natural disasters, bad weather conditions, or crop disease. This investment requires time and patience because the returns cannot be acquired quickly.
Small farmland investment is different from row crop and livestock investments because of how the land is utilized. In this type of farm, they are mainly producing timber, minerals, vineyards, and more.
To achieve success in this investment, you must have a background in the agriculture industry. Small farmland can be easier to handle than row crops.
Commercial and Residential
Commercial and residential land investments are the most common types of land investments. Although the land is yet to be developed, this type of investment has an easier financing process. It is necessary for the lenders that the raw land’s purpose is clear, and it gains profit in return.
Choosing the right land to be developed is essential. Investors must assess the market and environment before deciding. Research and analyze the location first.
What are the Benefits of Raw Land Investment?
Listed below are the benefits of having raw land investment:
- There are little competition and a limited amount of land, but many developers.
- You can buy and sell raw land quickly.
- The land is a profitable long-term investment and less expensive. There are no mortgage costs, low taxes, and no utilities to maintain.
- You can divide your lot to have multiple streams of revenue.
- The piece of raw land can be turned into a developed property.
4. Mixed-Use Development
Mixed-use development is a fusion of residential and non-residential buildings within a city or state. Commercial and industrial developments are infused with residential living. The objective of mixed-use developments is to provide convenience for nearby residents. One of the benefits of this development is the house affordability and walkability of the house from workplaces and amenities. Mixed-use developments are built to complement various types of real estate together.
Mixed-Use Developments include outdoor spaces and common infrastructures for the residents. It is beneficial if the market, school, church, gyms, and malls are located within the community.
What are the Benefits of Mixed-Use Development for Investors?
Developers and investors find new ways to merge urban and eco-friendly living in one space. This is the reason for the growth of mixed-use developments. The demand for these developments is continually increasing, even for millennial homebuyers.
Mixed-use developments attract homebuyers because of the sense of community, which everyone would like to experience for the long-term.
Here are the reasons why you should invest in a mixed-use development:
- Mixed-use developments can have multiple streams of income because of their diversity. They can acquire profits from clients for commercial and residential spaces.
- Within the community, there are property managers who will handle the clients’ needs and challenges of multiple properties.
- Their properties are often near other amenities, which provide convenience and comfortability for the residents.
- The value of the properties can increase due to the demand for homebuyers and other tenants.
Factors to Consider When Investing in Mixed-Use Developments
As an investor, there are several factors you should analyze and consider before procurement. Here are they:
The growth of mixed-use development is through the help of a successful design. The overall visual appearance and layout of the developments are essential for future clients. It includes the design styles of the infrastructures and the flow of the community. The most common designs include vertical and horizontal mixed-use blocks and walkable neighborhoods.
Accessible and Great Location
You must consider the location of the development. The clients look for places that have a good system of transportation. It should be accessible to other cities. Moreover, there should be job growth, new housing construction, and city development projects that increase its value.
Mixed-use developments should incorporate retail stores, restaurants, parks, malls, and other local attractions. It is also essential that these amenities are near residential spaces. The central concept of mixed-use development is to provide a life-work-play-rest lifestyle. One of the biggest appeals of these developments is the convenience of shopping and dining in the vicinity of your living space.
5. Rental Properties
A rental property is a residential, commercial, or industrial property leased or rented for a tenant. There are short-term rentals, such as vacation rentals. Meanwhile, there is a contract between two parties regarding the years of the lease in long-term rentals.
There are different residential rental properties: single-family homes, duplexes, and triplexes. On the other hand, there are also different commercial rental properties, such as multifamily, warehouse, office space, retail space, and multi-use.
For beginner investors, handling residential rental properties is easier and less expensive. It is also easier to get financing because of the less money required.
Owning a rental property is an investment that requires time and dedication. Most investors purchase a rental property to gain passive income and earn more than they spend on expenses. However, not every rental investment is not profitable initially.
What are the Benefits of Investing in Rental Properties?
In any real estate investment, there are potential risks. It can be challenging, especially if you are a new investor, but you can financially succeed through proper knowledge. The following are the benefits of investing in rental properties:
- Utilize the profits from rental property as a passive income.
- When real estate value increases, the value of the rent increases as well.
- Real estate value tends to be more stable than the stock market.
If you are going to invest in places far from your home, check the market first. Ensure that these locations meet the following criteria:
- The demand for rental properties must be high because the supply of housing is low.
- Verify the job growth, population growth, and economic expansion. These are good indicators that you can invest in rental properties.
- The average rental income must be able to support the price of the rental property.
Save Up and Invest
Learning and investing in real estate can be challenging but is profitable. You must know how much money you are willing to risk. Learn how much your budget is and how you can have a financing process, which will support your investment.
Real estate investors can earn money through rental income, value appreciation of the property, and income generated by business activities. This investment can provide passive income and stable cash flow.
As time goes by, the value of the properties increases. It ensures that the value will increase because land and buildings are appreciating assets. It only differs in the rate of appreciation.
Whatever type of real estate investment requires knowledge. Make sure to research that location is accessible and appropriate to the business.