Different Types of Real Estate Investments

There are several different types of real estate investments and it is important to understand what each type of investment is and what the benefits and risks involved are. The types of investments that involve real estate include Real Estate Investment Trusts which are also known as REITs, real estate partnerships, vacation rental property, rental property, and raw land investments. Each of these real estate investment types has its own advantages and disadvantages.

1. Residential Property Investing

Residential real estate can be used as rental properties or placed for sale. Many investors are offering creative finance strategies to attract buyers who cannot qualify for bank financing. Popular financing options include lease purchase option agreements and seller carry back mortgages.

2. Property Trusts

This method requires the least amount of capital to invest. Shares or units in the trusts are usually purchased and this entitles the investor to regular dividends as well as possible capital growth later on. The investor does not actually own the physical property.

3. Commercial Property Investing

Commercial property has the potential to generate substantial profits as long as investors evaluate market conditions. Investors may be entitled to tax incentives when commercial investments bring employment opportunities to the area or when properties are upgraded using energy-efficient technology such as solar panels or other forms of green energy.

4. Repossessed Property

Property (Residential or Commercial) can be purchased through Mortgagee auctions or sales. Usually, the previous owner has come under financial stress or hardship and unable to meet their obligations to repay the debt. Therefore, the lender has repossessed the property from them and is now selling it to recover the outstanding balance.

5. Property Developer

The top of the food chain is the Property Developer. They start with a piece of land and develop it into a Residential or Commercial Property, which they can completely sell or rent out. This is where the most profit can be made out of all the types of investing.

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