In our QUICK START to Real estate investing class, we cover a lot about why real estate is a good investment, how it can build long term wealth, and many of the benefits of investing. Once someone makes the decision to move forward with Investing, there are many different strategies and options available to them. We thought it would be beneficial to briefly discuss they types of properties available, and some of the attributes of each.
- Land: Typically, if someone purchases land, they are looking to develop it, and/or build on it. From an investment point of view this is typically looked at with much longer lead times, a higher degree of risk, but potentially much stronger returns. We would recommend land purchases for very experienced investors.
- Pre-Construction: There have been many that have done extremely well with pre-construction over the last decade. Unfortunately, this has typically been because of luck rather than investing skill as pre-construction could be a very speculative investment. We suggest investors ask themselves the simple question “what options do they have once they take possession?”. Either they can continue to hold it or sell it. If they can hold the asset and make a positive cash flow, then great it could turn into a great opportunity. However, If they are in a position that they have to sell the asset when they take possession (ie: it will lose money every month if they continue to hold). If the market takes a downward swing during the construction time, there is a great deal of risk to the investment and they will likely lose money.
- Condos: There are many that still invest in condos today and are successful at it, however we advise to proceed with caution. We always preach having a positive cash flow and really understand condo Investing before moving forward, be very weary on your financials to ensure you are not bleeding money each and every month. A real Positive is that trends are pointing to increased demand as population is priced out of larger homes, and there is generally less upkeep. On the negative side however, condos have a large fee in maintenance that is not controlled by the investor and is not predicable. Also, there is very little an investor could do to add value or force appreciation (as you could with other property options)
- Single Family: For any new investor, we typically advise to start in Single family starter homes. From a liquidity perspective, these are the most liquid in the non-liquid area of real estate. Entry prices are fairly inexpensive, and there are many options to add value and force appreciation (ie: adding a second suite, an extension, renovation for higher rents, etc). In General, purchasing a single family home should provide a healthy cash flow to mitigate risk on a monthly bases, but also be a catalyst to start building long term wealth.
- Student Rental: Purchasing a student rental is similar to purchasing a single family property. The main differences are in cash flow, upkeep, and financing. Given that you rent out per room, there is a great opportunity to cash flow much higher that single family. Students provide much greater wear and tear on properties, so likely better to have some sort of property management in place. Banks are also more reluctant to lend for student rental properties or make the terms less desirable. Overall it is a give an take between cash flow and management required, but student rental investing could be very lucrative and a great option for those that do need the active income on a monthly bases.
- Multi-Family: As investors become more experienced, they typically look to move into Multi-Family. If you look at real estate like a business, this makes perfect sense. Financing is typically easier as the banks view it as a business and pay more attention to the property rather than the investor or other properties around it. With more units, you can spread your risk out when you have vacancies (as you are less reliant on one or two tenants), and expenses are also spread out over many sources of revenue. The other large benefit is that it is easier to manage a 50-unit apartment building, then to manage 50 single family homes, as you scale, systems become much more important. Multi-family has also been called the “recession-proof” investment. Given the fact that the building is appraised based on its income rather than what other properties around it have sold for, and that rental demand is usually higher during a recession (as people are not purchasing homes), the value of Multi-family tends to also increase as markets are flat or even decreasing.
- Commercial: Commercial real estate investing, were your tenants are other businesses we also recommend for experienced investors. A great positive is that you typically do not have to deal with renovations, and you can also evict a tenant once the lease expires (which you cannot do in residential). The main drawback with commercial is that if there is a vacancy, then you may be waiting for a long time to pick up a tenant, specially when they could be a large anchor tenant (like a grocery or department store. Also, the location and mix of tenants could be very important and also impact who you can and cannot lease too.
There are many different property options available to Real Estate Investors. One hurdle is that many investors try to look for the right financials only, rather than understanding the best strategy for them and their goals. Regardless of the path you choose, we always suggest utilizing a team that understands Real Estate “Investment”. Many claim to understand Real Estate, but understanding the investment aspect is much different and in many cases may lead to a different path or option. One of your best allies could be a mentor or coach that can help you navigate through the world of real estate investment.
Visit us at www.VenturePropertyInvestments.com and our pages on facebook or LinkedIn to learn more about how we invest in real estate to profit in both an increasing or decreasing housing market. Or contact us if you would like to learn how we are providing double digit returns for our partner’s and clients year over year.
Until Next Time,
Build Wealth. Live Life
If you haven’t come out to one of our events, feel free to visit our events page on our site at https://venturepropertyinvestments.com/events/. If you are just starting out, or a seasoned pro, come out to Learn and Network with others like you.
Martin Kuev & Chris Shebib are full time Real Estate Investors, Realtors and Wealth Coaches who have over 20 years experience in Real Estate. With multi-million-dollar real estate portfolios and a team built over the past decade, they left the corporate world to have the flexibility to spend time with family, continue their own real estate investments and help others build long-term wealth.
Both Chris & Martin are first and foremost Husbands, and Fathers. Both are actively involved with their families and each have 3 daughters keeping home life full of surprises.