Are you considering property investment to make some money this year? If so, you might be surprised to know there are five main types of property, investors purchase for their property portfolio and within each type there are varieties that investors can elect to invest in exclusively e.g. standalone homes, flats or apartments.
Most investors start out in the residential sector. It is arguably the most prolific sector for investors popular with new and ‘ma and pa’ (Mums and Dads) investors. In this article, we briefly mention the various investment choices and what you need to know next to get onto the property ladder as an investor.
Real Estate Types Preferred By Investors
Most people think of residential investment property as being just single family dwellings, and typically those which are suitable for investment strategies such as buy-to-let or renovate and flip. However, all residential properties including HMOs, holiday lets, flats, apartments, townhouses are bought by investors. It’s a huge sector and it varies area to region to state to country so to do well as an investor you need to be educated and learn the legislation governing it.
Commercial property is pretty much what the name says. It’s an investment in property meant for business, such things as office buildings, storage centres, shopping centres, retail units, and the like. These are properties not meant to be lived in and are zoned for commercial purposes only. Many residential investors move onto commercial after a few years to add variety to their property portfolios.
Most often industrial property is for such things as manufacturing. These properties can, like commercial properties, be quite expensive because they are sold in larger acreages. You will usually find industrial land being set apart from residential property because of the potential for air, land and water pollution when living too close to manufacturing.
Having said that, this was not always the case and some older city zoning laws had manufacturing scattered throughout residential areas. Newer developments are being zoned differently in the latter 20th and now the 21st centuries.
Typically, land is for agricultural purposes. However, much of the land for sale is zoned for residential developments, commercial, industrial uses.
Some land is for mixed-use purposes but the one thing that sets land apart from the other types of property is that this is all you will be getting – land. There are no structures being sold with the land although it might come with planning permissions included.
Mixed-use property is any combination of two or more of the above examples. For example, it could be commercial and residential such as an area predominantly homes but where there are retail units or office buildings scattered throughout. It’s just as the name implies, property for mixed use. Unless being sold as land, mixed-use property investment UK sales typically already have buildings on all or some of the property.
Property Investment Strategies
There are a number of ways to invest in property. The investors before us have done the hard yards and now many strategies are commonly utilised including the most common i.e. buy, hold and rent or ‘buy to let’.
Buy to Let
With some investor education, you will find that it is possible to invest in property as a buy to let with little deposit or no deposit. Buy to let is the most common investment strategy and preferred by new investors for its straightforwardness and competitive financing options. Again this is thanks to our investor predecessors. They have opened the floodgates to service providers now competing for investor business with tailored products like investor mortgages.
Plus it’s not just in the lending market, with the rise of mobile Apps, there are plenty of property tools available and online there’s free stuff from the property sourcing platforms like Sourced.co’s free property investor learning.
Another popular strategy is investing in REITs. There are some types of REITs (Real Estate Investment Trusts) that are managed over a long period of time and can provide residual income over that timeline. Others are set to build equity for retirement pensions and others yet are short-term investments.
Renovate and Flip
Purchasing a tired property and refreshing it before listing it for sale is also an attractive investor strategy. Though long term buy and hold (buy to let) investors would say this is more property speculation than investment. You buy a building, commercial or residential, that needs a bit of work, which you complete and then sell it for a much higher price. Of course this is a ‘business’ and a healthy profit of 15 – 20% realised to make it worthwhile. It is also a lot more risky than buy to let investing.
Property investment is huge business and as an investor it pays to be informed. Know what kinds of properties you can invest in and figure out how best to about it. Use the free resources on offer to help you understand the market and always seek advise from the professionals like your accountant, lawyer and lender.
Remember the resources that are free are fantastic, but rely on them exclusively and make a bad investment then there is much to lose, so don’t go it alone engage professionals to advise you.