Which Types of Real Estate?

There are many types of real estate, and different ways to invest in them. Which way is best is your decision, according to your particular needs. Here are a ten ways to consider, each with their advantages and disadvantages.

1. Rental homes. Advantages: An easier way to get started, and a good long term return on investment. Disadvantages: Landlording isn't much fun, and you typically wait a long time for the big pay-off.

2. Rent-to-own deals. Advantages: When you buy, then sell on a rent-to-own contract, you get higher rent, and the buyer is usually responsible for maintenance. Disadvantages: Bookkeeping can tricky, and many tenants don't complete the purchase (this can be an advantage actually, but it does mean more work for you).

3. Low income rental properties. Advantages: The same as with other rentals, but with higher cash flow. Disadvantages: The same as with other rental properties, but with more repairs and tenant problems.

4. Fix-and-sell. Advantages: Quick return on your investment, and creative work. Disadvantages: High risk, due to many unpredictables, and you get taxed heavily on the gain.

5. Buy cash, sell terms. Advantages: A high rate of return by paying cash to get a good price, and selling on easy terms to get a high price and high interest. Disadvantages: Ties up your capital for a long time.

6. Buy, split, and sell land. Advantages: Simpler than most real estate investments, with the possibility of great profits. Disadvantages: Can take a long time, and you have expenses, but no cash flow while you wait.

7. Boarding houses. Advantages: More cash flow renting a house by the room, especially in a college town. Disadvantages: More headaches renting a house by the room, especially in a college town.

8. Commercial real estate. Advantages: Triple-net leases mean little management and high returns. Disadvantages: Tough market to break into, and lost income on vacant storefronts for a year at a time.

9. Live in it and fix it up. Advantages: New tax law means you can fix it up, and sell for a big tax-free profit after two years, then start the process again. Disadvantages: You may have to move a lot.

10. Real estate speculation. Advantages: Buy in the path of growth and hold until values rise, and you can make large profits, especially if you buy low to start. Disadvantages: Prices aren't always predictable, you have expenses with no income while waiting, and transaction costs can eat much of the profits.