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Residential & Land Property Types
The real estate world offers many types of investment property ranging from vacant land to class A office buildings. Each has its own idiosyncrasies and pitfalls to watch out for. Throughout history, investors have made a bundle and lost a bundle. If you are a novice, be sure to do the math and research. As important, hire professional and ethical representation. Doing anything less is like playing poker without knowing the difference between a flush and a full house. To begin or enhance what you already know, send us an email at dbacani@naicapital.com and I will make sure you receive our free online newsletter.
In the meantime, here are the most common places where people like you choose to invest:
Primary Residence:
Yes, your home is an investment. Aside from its appreciation and the tax benefits of writing off your mortgage interest, your castle can be used to trade-up using no more than $250,000 ($500,000 if you are married) of your home’s profit tax-free towards the purchase of a new home.
If you are renting and helping to pay off someone else’s investment, your first real estate investment should be in a place of your own.
For more information on how you can be referred to the right residential specialist, contact Dan Bacani at 626-930-9339.
Land:
Primarily the arena of savvy (or not so savvy) developers, buy-and-flip speculators and the occasional single home builder, the purchase of vacant land requires patient research, an instinct for value and capital.
Land can be income producing. Avocado groves, RV storage and farmland are a few examples. When it comes to purchasing land for long term passive income, buying in bulk is advisable in order to mitigate management expenses.
Mostly, Investors purchase land to build tract houses, shopping centers, concrete tilt-up industrial buildings, mini-storage facilities, etc. In general, the development of “dirt” represents the most profitable venture for the real estate Investor in the shortest amount of time. It can also be the most disastrous for the unwary and under funded.
Small Residential:
Investment in condominiums and single-family homes (including 2-4 unit rentals) are the most popular forms of real estate investing. As long as the residential property is under 5 units, you can avoid commercial financing which can mean higher interest rates, pre-payment penalities and balloon payments. New Investors can live in one unit and rent the other unit(s). If you are fortunate, the income can pay down the expenses and possibly the mortgage of the property. Over time, you can save up and/or refinance and use the equity to purchase additional investments.
Multi-Family:
Also known as apartments, multi-family properties come in all shapes and sizes. Anything over four units requires commercial financing. But the advantages of a smartly bought apartment complex are clear. In a tight market where vacancies are low and the property is in a desirable area, there are more tenants in the market looking to rent an apartment unit than any other type of investment real estate. “Location, location, location” is never more important. Also, more units translates into less of a chance that a property will be 100% vacant at any one time. In a ten-unit building, a middle-of-the-night move-out equals a 10% vacancy factor. The same move-out in a duplex makes things a bit tougher at a whopping 50% vacancy factor which could mean that the property produces less than it costs to service the debt and expenses.
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