What Type of Real Estate Investment is Right For You?
Getting started in real estate investment requires some knowledge of the real estate business, money and research. Prospective investors who would like to purchase their first investment property need to understand the different types of investment opportunities, where to get financing, and other important details. These tips will help someone who wants to get started buying a real estate investment.
Types of Real Estate Investment
Before an investor can decide what type of real estate is right for them, they must first understand the different types of investment. Each type of real estate investment has advantages and disadvantages. Property investors who do their homework are more likely to end up with real estate that's suitable for their situation.
Residential real estate is real estate that houses single or multiple families. Residential real estate includes apartment buildings, single family homes and duplexes. Residential real estate often requires less investment than commercial and industrial properties. Residential real estate includes rental properties and fix and flip properties.
Residential real estate is available in nearly all locations, from rural areas to large cities. Property investors who would like help and guidance throughout the purchasing process can easily find a real estate agent who can help them make this decision.
Commercial real estate can be made up of office buildings and retail locations. Office buildings are often divided into many units and are then rented to many different businesses. The advantages of this type of real estate is that when one tenant moves out, the property can continue to generate income because other tenants still remain.
Large retail locations usually depend on the success of the business in order to remain profitable. Property owners have an incentive to keep their building looking nice because the more well-maintained that a business is, the more trust customers place in the quality of the shop itself.
Commercial real estate is often found in cities and urban areas. Often commercial real estate is confined to small sections of cities due to zoning laws. Property owners are often people who live near towns and cities where commercial real estate is nearby.
Industrial real estate is any real estate that involves warehousing, factories and other similar types of properties. Industrial real estate can typically be found in urban areas, or may be located in isolated areas far from cities and town. This type of investment can be very profitable for the right investor. Often, businesses are willing to pay a lot more money for industrial sites that have special accommodations for their particular type of business.
Where to Get the Financing
Many people who want to get their start in real estate investment do not have the financing they need to pay for their first property. To get stared, real estate investors must first get financing from an outside source. Investors may turn to different places in order to make this happen.
Traditional lenders are banks. Most people seeking a mortgage will turn to banks for some kind of mortgage. Traditional lenders offer long term loans and require a down payment that is a certain percentage of the cost of the property.
In addition to traditional lenders, private lenders and hard money lenders are also available. Hard money lenders offer short-term loans for a high interest rate. Real estate investors who have a clear exit strategy and who understand the risks of real estate investment may use hard money lenders for a temporary loan to help them get started with a property.
Private lenders usually seek partnerships with real estate investors. Private lenders typically provide cash to pay for real estate, and then expect the investor to repay the lender within a year. Different private lenders will set different terms, so real estate investors working with private lenders should read the terms carefully before signing an agreement.
Which One is Right For You?
A person hoping to decide which type of real estate investment must first consider their interests and knowledge of real estate. Someone with limited knowledge of the real estate industry may want to start with residential real estate, because it is accessible and often easy to renovate. Once an investor is experienced with residential real estate, he or she may want to move into commercial real estate. Commercial real estate often requires more money up front and greater understanding of the local markets.
Consult With Professionals for More Information
Any potential real estate investor who wants to get started with his or her first property should speak with a Prospector real estate professional for guidance. Working with a trained and reputable real estate agent can help a beginner get started on the road to investment.