A Real Estate Investment Trust, or REIT, is similar to a mutual fund in that it takes the funds of many investors and invests them in a collection of income-generating real estate properties. Plus, REITs can be bought and sold like stocks on the stock market so they can be cheaper and easier to invest in than property. Types of real estate investments There are four main categories of real estate investing: Residential (buildings that house people) Commercial (spaces in which businesses operate).

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What are considered the best types of real estate investments? With the U.S. real estate market on the rise, investors are sifting through every available property type to discover which will help them profit. So which sectors and properties are the best moves for investors today? Keep reading to learn more about the best type of real estate investment for you.

Types of Real Estate Investments

There are several types of real estate investors should be familiar with: commercial, residential, raw land, new construction, crowdfunding platforms, and REITs. Each of these types will come with unique advantages and disadvantages that investors should evaluate. Let’s look at each of the options available:

Residential Real Estate
Commercial Real Estate
Raw Land & New Construction
Real Estate Investment Trusts (REITs)
Crowdfunding Platforms

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1. Residential Real Estate

There are numerous rental property types in residential real estate, though the most common is thought to be single-family homes. Other residential properties include duplexes, multifamily properties, and vacation homes. Residential real estate is ideal for many investors because it can be easier to turn profits consistently. Of course, there are many residential real estate investing strategies to deploy and different levels of competition across markets — what may be right for one investor may not be best for the next. For this reason, choosing the right exit strategy and market is key when it comes to residential real estate.

The most common exit strategies used in residential real estate include wholesaling, rehabbing, and buy and hold properties, which can be used to generate rental income. Investors should be careful to consider which strategies would work best in their market area by conducting a thorough market analysis.

When managed correctly, a residential real estate investment can yield attractive profits. This is because, in addition to earning steady cash flow, residential real estate benefits from a number of tax breaks.

2. Commercial Real Estate

The best commercial properties to invest in include industrial, office, retail, hospitality, and multifamily projects. For investors with a strong focus on improving their local communities, commercial real estate investing can support that focus.

One reason commercial properties are considered one of the best types of real estate investments is the potential for higher cash flow. Investors who opt for commercial properties may find they represent higher income potential, longer leases, and lower vacancy rates than other forms of real estate. Investors may also enjoy less competition in commercial real estate because purchasing these properties can be a larger undertaking than working with residential homes. To learn more about getting started in , be sure to read this article.

3. Raw Land Investing & New Construction

Raw land investing and new construction represent two different types of real estate investments that can diversify an investor’s portfolio. Raw land refers to any vacant land available for purchase and is most attractive in markets with high projected growth. New construction is not much different; however, properties have already been built on the land. Investing in new construction is also popular in rapidly growing markets.

While many investors may be unfamiliar with raw land and new construction investing, these investment types can represent attractive profits for investors. Whether you are interested in developing a property from start to finish or profiting from a long-term buy and hold, raw land and new construction provide a unique opportunity to real estate investors.

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Investors should be prepared to complete extensive market research to maximize profits when investing in raw land and new construction. This will ensure you choose a desirable area and prevent the investment from being hampered by market factors.

4. Real Estate Investment Trusts (REITs)

Real estate investment trusts or REITs are companies that own different commercial real estate types, such as hotels, shops, offices, malls, or restaurants. You can invest in shares of these real estate companies on the stock exchange. When you invest in a REIT, you invest in the properties these companies own without the added risk of owning the property yourself.

It is a requirement for REITs to return 90% of their taxable income to shareholders every year. This offers investors to receive dividends while diversifying their portfolio at the same time. Publicly traded REITs also offer flexible liquidity in contrast to other types of real estate investments. You can sell your shares of the company on the stock exchange when you need emergency funds.

5. Crowdfunding Platforms

Crowdfunding platforms offer investors access to several assets that offer high returns and are traditionally reserved for the wealthy. While this offers the ease of finding assets to investors, this type of real estate investment also introduces a high amount of risk. Crowdfunding platforms are typically limited to accredited investors or those with a high net worth. Some sites offer access to non-accredited investors as well.

The main types of real estate investments from crowdfunding platforms are non-traded REITs or REITs that are not on the stock exchange. In terms of non-traded REITs, your funds may be invested for several years with no possibility of pulling your money out when you need it.

What Is the Best Type of Real Estate investment?

The best type of real estate investment will depend on your individual circumstances, goals, market area, and preferred investing strategy. While many investors want a more straightforward answer, determining the best type of investment property is a subjective process. Choosing the right property type comes down to weighing each option’s pros and cons, though there are a few key factors investors should keep in mind as they seek the best choice.

When choosing the best type of investment property, the importance of location can not be understated. Investors operating in “up-and-coming” markets may find success with vacant land or new construction, while investors working in more “mature” markets may be interested in residential properties.

Aside from location, investors should also be aware of their own preferences when it comes to investing. Assess your preferred level of involvement, risk tolerance, and profitability as you decide which property type to invest in. Investors wishing to take on a more passive role may opt for buy and hold commercial or residential properties and employ a property manager. Those hoping to take on a more active role, on the other hand, may find developing vacant land or rehabbing residential homes to be more fulfilling.

As you choose the best type of investment property for you, it is also important to keep in mind that many investors find success investing in various property types. It is not uncommon for investors to familiarize themselves with residential real estate before moving on to commercial properties. That being said, there is no reason investors cannot achieve success investing in multiple property types.

Active Vs. Passive Investing

An important distinction to make when choosing an investment strategy is between active and passive investments. Active strategies, as the name implies, require a more hands-on management approach. For example, rehabbing a house is considered an active investment strategy. You will be in charge of coordinating renovations, overseeing contractors, and u

Types Of Real Money Investors