One of the first things I realized when I jumped into studying real estate is that there are literally dozens (if not hundreds) of different real estate investments, strategies, and tactics. Real estate investments range from single family houses and apartments to strip malls and office buildings to oil wells, vacant lots, self-storage facilities and large pieces of undeveloped land. Each of these types of properties has its own sets of benefits and pitfalls, and an expert in one type of property investment isn’t necessarily an expert in the others.
In addition to all these property types, there are many ways to make money within each. Some investors will buy property, hold for many years, and enjoy the recurring cash flow that the property produces through rental income; in fact, many investors retire off the money their rentals provide for them every month. Other investors prefer to buy undervalued property, fix it up, and resell it for a quick profit. Other investors will build property on undeveloped land, selling off individual parcels to home buyers or leasing office space to businesses. Still other investors will never actually own any property â€“ they spend their time finding good real estate deals and passing those deals off to other investors for a flat fee or commission.
While there’s no right or wrong way to make money as a real estate investor, each investing style and each property type holds its own set of benefits and drawbacks. Certain types of real estate investing appeal to certain types of investor personality types, some investment styles require more upfront capital, and some investing strategies require much more of a time investment.
The most common type of real estate investing for new investors is residential property (single family houses and apartment buildings). Because these types of properties are most familiar to people, and because there is a large base of traditional financing available for these types of property investments, a great many investors start their careers buying residential properties.
I’ve decided to start investing in residential real estate, specifically starting with small and mid-sized apartment buildings. That’s not to say that I wouldn’t invest in other types of real estate should the right deal come along, but I believe that the hallmark of a good investor is specialization; good investors pick one niche area and become the best in that area.
Now that I’ve called out my preference for multi-unit residential real estate (apartments), it’s probably worth discussing why apartments are more attractive (to me, at least) than single family homes or duplexes/triplexes/4-plexes. In my next post, I’ll discuss some of the differences among the various types of residential real estate and why I’m choosing to start my real estate career investing in apartments.