Stick To One Type Of Property Or Diversify?
Many people change from managed to self-directed individual retirement accounts because they want to try their hand at choosing their investments. If you have some passion for the world of real estate, you could try building a diverse portfolio of rental properties or stick with one profitable venture that is easily managed. It’s important to do plenty of research before moving a cent of your savings into a particular investment opportunity. Start by considering what type of property you want to start investing in based on prior experience or costs.
Income Production – Money Making Money
Some properties produce an ongoing income throughout the months or years, while others only primarily offer profits when the investment is sold to someone else. Investopedia says that both types are sound options for investing, but they require different skill sets. Active properties require quite a bit of maintenance and care. All properties need occasional repairs, but options that see daily foot traffic or have full-time residents will show wear and tear first.
Residential vs. Commercial – What is Your Experience level?
Most real estate investors start out with residential properties because they are building on personal experience with choosing and purchasing a home. Some start out with a single-family house and earn a modest rental income, while others tackle the challenges of condos or townhouse blocks with multiple tenants, according to Family Money Values (blog.familymoneyvalues.com). Residential investments come in both income production styles as well.
Commercial property investment usually requires a little extra study on your part. While you may understand the features of a good residential apartment from firsthand experience, there are many pitfalls in commercial investing that can trip up a newcomer. Don’t let this deter you from purchasing retail space you lease out if it’s your favorite field. Family Money Values says that you can start with affordable self-storage or parking lots, or try buying and selling an entire strip mall if you have the funding for the purchase. Types of Real Estate Investments – (blog.familymoneyvalues.com)
Shop, Work and Build
Within the category of commercial property, lies three more unique options. The most common type of commercial space is retail, which includes any storefront, restaurant building, or giant mall that is primarily focused on selling products or services to the public. You will need to complete in-depth studies on retail spaces to determine their visibility, traffic levels, and other features before deciding if they are worth investing in warns Investopedia.
The second subcategory of commercial space is the office option. Offices can be used to provide services from doctors and lawyers, or they can be private spaces that companies don’t allow the public to access. These properties usually avoid the very high traffic levels of retail spaces, but they still require plenty of upkeep.
Commercial investment fans can also pick up industrial properties if they can find enough capital. A worthwhile factory or manufacturing space could cost well over $1 million. However, investors with lots of experience in a specific industry could buy a space they understand how to renovate and improve.
Mixed Use and Multiple Tenancies
Properties that blend multiple categories in one space can be slightly more complicated to handle but also offer big rewards if managed correctly. The Balance says that owning a property handling multiple tenants or mixing retail and commercial can protect you from long-term risk. If the retail store on the first floor goes out of business, you may still have income coming in from the condos on the second and third floors.