There are several different types of real estate investments and it is important to understand what each type of investment is and what the benefits and risks involved are. The types of investments that involve real estate include Real Estate Investment Trusts which are also known as REITs, real estate partnerships, vacation rental property, rental property, and raw land investments. Each of these real estate investment types has its own advantages and disadvantages.
Real Estate Investment Trusts are companies that sells, buys, manages, and develops land and properties. These REITs are set up as a security that sells on all of the major exchanges just like a stock, and directly invests in real estate by mortgages or property. These trusts get special consideration concerning taxes and they usually offer a high yield and are very liquid compared to other real estate investment types. Individual people can invest in this type of real estate investment by purchasing shares directly on one of the open exchange markets or through an investment broker.
The next type of real estate investment we will look at is a real estate partnership. This is when several individuals partner together and pool their funds and resources for the sole purpose of real estate investment. Investments are made with joint ownership with the other partners in the real estate investment group.
Vacation rental property is one type of real estate investment that provides a rental income most of the time. This type is considered a long term investment, but a big advantage is that you can sell this property and get the value of the property no matter how many years you collect rent for the property. The disadvantage is that as the owner of the property you are responsible for any damage, repairs, and maintenance even if the renter caused the problem. If the problem was caused by the tenant then you do have some remedies available in civil court for the cost of repairs and parts. This investment property is generally rented for short periods of time, and there may be periods of vacancy where there is no rental income from it.
Rental property can be one of the best real estate investment types when it comes to long term income. This type of investment property usually provides a monthly income unless the property is vacant. No matter how long you own the investment property you should get back at least the value of your original investment, and in most cases much more. You collect rent for as long as you own the property without your investment ever losing value, so the monthly income minus expenses is a lot like a very high interest payment. Raw land real estate investment is when a person or company invests in raw land and then makes a profit off of the natural resources of the land or develops the property.
No matter which real estate investment type you choose, you should be aware of all the advantages and disadvantages for the type you are planning to invest in. Do the research and make your investment plan, including which types of real estate you want to invest in. Do your homework before investing and you will never be sorry afterward.