Real Estate Investments by property Types

Advantages & Disadvantages of the different types of real properties

Single family home

Advantages :

• Easy to purchase
• Easy to rent
• Easy to sell
• Easy to finance
• Flexible financing

Disadvantages:

• High purchase cost compared to the income from rent.
• A vacancy is 100% of income
• High maintenance cost

Duplex

Advantages :

• Easy to purchase
• Easy to rent
• Easy to sell
• Easy to finance
• Flexible financing
• Dual Income

Disadvantages:

• High purchase cost compared to the income from rent.
• A vacancy is 50% of income
• High maintenance

Apartments - four or more units

Advantages :

• Per unit cost is lower
• Easy to rent
• Value is determined by income potential
• Flexible financing
• A single single vacancy is a smaller percentage of income

Disadvantages:

• Harder to finance
• Larger Down Payment
• Harder to sell

Vacant Land

Advantages :

• Easy to purchase
• High profit if in the correct place at the correct time.
• Owner financing often avilable

Disadvantages:

• Hard to lease
• Hard to Finance
• High Carrying cost
• Lack of income
• Hard to sell
• High down payment

Retail Strip Centers

Advantages :

• Easy to rent if in good location
• High rents per square foot
• Low maintenance
• Successful tenants stay

Disadvantages:

• Hard to Finance
• A bad location is very hard to fix
• Larger down payments
• Vacancy's can last a while

Small office buildings

Advantages :

• Easy to rent if in good location
• High rents per square foot
• Low maintenance
• Successful tenants stay

Disadvantages:

• Hard to Finance
• A bad location is very hard to fix
• Larger down payments
• Vacancy's can last a while

Small Warehouses

Advantages :

• Easy to rent if in good location
• High rents per square foot
• Low maintenance
• Successful tenants stay

Disadvantages:

• Hard to Finance
• A bad location is very hard to fix
• Larger down payments
• Vacancy's can last a while

Others: farms, large office buildings , malls,
large warehouses, factories, RETS, partnerships and more….

Advantages :

• Each of these has advantages unique to the type of investments and the biggest advantage is economy of scale.

Disadvantages:

• Leave these alone until you are an experianced and can asses the advantages and disadvantages.

NOTE:

If you choose to start real estate investing with single family homes, get more than one rent house as soon as possible, or keep a cash reserve in case of vacancy. When you have several rental units, your risk is spread out. If you only have one rent house, a vacancy means you are 100% vacant with no income. If you have five houses, and one is vacant, your vacancy rate is only 20%. The same is true if you get that renter from hell because the income from your other rentals will make it easier to deal with the temporary financial problems that type of renter causes.

In all the years I have been investing in real estate I have never calculated a potential mathematical loss that was more the 10% of the value of the real estate I was buying and I have never actually loss money on a deal.

Real Esate investing disadvantages In general:

Real estate is highly Ill-liquid over a short period of time. If you need to sell fast, you could take a loss. It is not advisable to invest in real estate without some expert advice. Some degree of physical and mental effort is required to maintain a real estate investment.

There is some degree of risk that a property could decrease in value, or the cash flow may not be adequate to cover the carrying cost. To reduce this risk, it is imperative that you read all you can, and learn as much as you can on the subject.