What Type of Real Estate Should a New Investor Choose?
Investing in commercial real estate in Owensboro (or anywhere else) is very much like dating. You have to spend a considerable amount of time and money to make your offering desirable. If not, you’ll have no chance! You will end up with nothing to show for your efforts and a smaller bank account. In this article, we’ll take a closer look at the different types of real estate investments people typically invest in and which ones are suited for the kind of landlord you are.
Land real estate
Some people purchase land for commercial development. This involves getting a team of architects, engineers, and other contractors to execute the land owner’s vision. Commercial work also means liaising with local government units regarding compliance, building codes, and zoning.
Some landowners develop their property for residential end users instead of commercial establishments. You usually see residential developments in in-fill areas or rezoned undeveloped or farmland.
Not all farmland is converted to residential developments, though. Purchasing farmland allows an individual to collect tax breaks for agricultural use. Developers often buy land to rent it back to farmers. Other areas are mineral-rich, and leasing it can prove to be especially lucrative in the long term.
Residential real estate
Most people are familiar with residential real estate holdings, and plenty of solo or small entrepreneurs have these kinds of assets. A common type of residential real estate is the single-family rental. These property listings can be townhomes, single-detached houses, or condominiums either managed by the owner or a property management company.
A small apartment or walk-up complex is called a small multi-family rental. These have a strong return on investment, but these are not for new landlords looking to get their feet wet in real estate. Month-to-month leases are standard with Multi-family rentals, so it is possible to see high turnover rates, especially in busy neighborhoods.
A subtype of single-family rentals is the Section 8 rental home. Tenants in homes with this designation are low- to no-income households, and the government pays for their rent. This is a guaranteed form of income since the client is technically the government, but it also comes with its challenges.
Vacation Rentals are single-family homes available for short term rentals. You can find these in desirable areas like neighborhoods near beaches, lakes, or entertainment and recreation centers. Property management companies often handle these types of rental homes.
A property someone acquires specifically to renovate and resell is called a fix and flip. Although it is very lucrative, fix and flip has its risks. For one, there could be unexpected repair costs involved in the renovation. A new landlord might also under- or overestimate the home’s resale value, or they might not know how to take advantage of the real estate market.
Real estate investments vary in type and market served. There are rental homes and properties for a wide variety of purposes, but each of these has costs and benefits. Succeeding in this area depends on the skills and resources of the investor. If you are new to the field, you will profit from having a good team at your back.
The Blake Hayden Group is committed to providing home buyers, investors, commercial landlords, and tenants with the information they need to navigate the real estate market. We are Owensboro realtors with over 35 years of combined experience, dedicated to guiding you to the best decision. Schedule a consultation with us today to learn more!