Real Estate Investment Types

Once you’ve got residential properties under your belt, the next easiest is investing in and managing industrial and commercial properties.

Renting Your Residential Properties
If the path of development stalls or turns in another direction, your bet on higher appreciation bailing out your investment turns out to be a sucker bet.

 

An excerpt from Book Five in “The Knowledge Path Series” dedicated to helping you find the place of your dreams in the Sierra Mountain resorts.

Part Two in a 5-Part Series: Is An Investment in Real Estate Right for You?

Part One: FOMO

Real estate experts recommended multifamily properties as a good first step while skipping raw land that only produces expenses not income until you sell.

By comparison multifamily rental units provided steady income.

Multi-Family Rentals
  • Normally rent checks came monthly by mail while the value of the unit appreciates.
  • Of course, now in a frictionless economy, they can be directly deposit funds into your account without delay.
  • Another example of, with the right insight, a fully functioning Knowledge ATM.
  • On the downside you’ll need to deal with problem tenants from time to time.
  • Depending on the age and condition of the property you’ll begin to incur high repair costs that will eat into your profits at some point.

Once you’ve got residential properties under your belt, the next easiest is investing in and managing industrial and commercial properties.

Renting Commercial Properties
  • The experts caution about jumping into large properties, advising beginners to start small.
  • Incomes tend to rise and fall with the ups and downs of the economic cycles.
  • When conditions favor your property and your vacancies are low you can generate large incomes with a full building.

What about shopping centers and strip malls?

Strip Malls and Shopping Centers
  • Like commercial properties in good times which generate high incomes with centers and malls you can share in the gross receipts of your tenants.
  • And, with the right location your land can appreciate quickly.
  • But, there’s a downside.
  • Buying can be complex and difficult to negotiate due to the property’s high cost.
  • So, zero cash deals can be extraordinarily hard to work out.
  • And, remember sophisticated tenants want to negotiate their best deals which will eat into your profits.

What’s the attraction to raw land?

Low Barrier for Entry with Raw Land
  • In great areas it can appreciate very quickly as development approaches your location.
  • And, before the path of development becomes common knowledge you may be able to tie up property for as little as $ 1.00 down.
  • However, without the strong appreciation probability, raw land requires improvements like streets, sewers, electricity and other utilities — all costs.
  • So it rarely gives you a positive cash flow, especially after the tax burden is factored in.
  • If the path of development stalls or turns in another direction, your bet on higher appreciation bailing out your investment turns out to be a sucker bet.
Initial High Cost of Entry in Self Storage

Likewise, building self-storage warehouses incurs out of pocket expenses.

But once they are built, or if you buy existing units, you can enjoy positive cash flow with little overhead and low operating expenses if you keep your vacancy rate low.

Steps:

(22) Selectively evaluate the best quality-of-life communities to live in and weigh the tradeoffs of risk and rewards for accruing real estate appreciation along a progression of rural and small towns that meet what your pocket books can afford.

(34) On your visits look for any newer developments that may trigger changes in neighborhood patterns. New construction in or around the neighborhood? Major regional economic adjustments? Transition from households with children to ones that are empty nests? Rezoning, and dramatically rising/falling land values?

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