Property investment can be a great addition to a real estate investor’s portfolio. It can provide a large onetime return or a continuous stream of income for investors. Many people do not realize it, but owning their own home is property investment. Without active cash flow coming from the investment, homeowners do not realize as their home appreciates in value their investment grows.
Property investment can be residential, business, or commercial and can include buildings or vacant land. The most common residential property investments are house flipping and rental properties.
Real estate investors often buy second homes with a rental property investment in mind. Vacation homes can pay for themselves by renting them out when not in use by the owners. These property investments are rented by the weekend, week, and sometimes by the month. Vacation homes such as beach houses in high tourist areas can demand a much higher rent than normal rental properties.
Residential rental property investments can include houses, apartments, townhouses, and condominiums. Houses can be single-family rental property investments or can be divided into multiple apartments. The demand of the area will help the real estate investor determine the best use for the property.
Buying homes to renovate and sell as a property investment offers a lump sum payment to investors. Although house flipping can be a profitable property investment, it can also be extremely risky. Distressed houses and probate properties oftentimes sell below market value and offer larger profits to real estate investors. However, investors must be able to assess the amount of work needed to repair the property.
Commercial property investments are generally more popular with more experienced property investors. Commercial properties can include office buildings, strip malls, hotels, and self-storage units. Multi-family housing such as high-rise apartment or office buildings also fall under commercial property investments.
When investing in commercial property it is important to understand the cash flow required to maintain the investment. There are costs to consider that are not involved with residential property investments. Commercial properties require employees such as maintenance workers and rental agents. There are utilities, taxes, and association fees. To accurately assess the value of a commercial property investment, all costs and fees must be considered.
When choosing land as a property investment, it is all about location. The location of the land can turn your property investment into a gold mine or a landfill. Land can be purchased, held onto for a couple years and sold for profit without investing additional money. Land can also be leased for a steady monthly income for the investor.