Real estate investment has become one of the most popular businesses among potential investors. The popularity of the real estate business is increasing and offers various investment opportunities and options. Each type has its benefits and risks to consider. Whether you are a beginner or a professional, you can invest in the real estate business as per your needs, and preferences, and even with low investment in hand, you can be part of this market.
When we talk about real estate investment in Dubai, it is exceptional. Dubai is one of the favorite destinations among potential investors from all over the world. Real estate investment in Dubai is booming and it offers various types of options to investors. The high prices and increasing demand for property in Dubai are the major attractions for investors.
As an investor, if you are curious about different types of real estate investment and want to know the major differences among various types of investment and the pros and cons of each type, then you are on the right page. After reading this blog, you can make an informed decision about your investment, which type of investment suits you according to your preferences, experience, and budget.
Concept Of Two Categories Of Real Estate Investment
There are many types of real estate investment, some of these are traditional and common among investors. In this type of investment, the direct involvement or interference of the investor is compulsory and some other types are not really but are also beneficial for the investors. It is possible to classify all of these types of investments into two categories.
The first category is physical real estate investment, in which physically you own the property, and as an investor, you are directly involved in the deal. For instance, residential property, commercial property, or land falls in the first category. You can be the sole owner of this type of property, you can resale it and earn more profit and you can rent it out and become the source of your passive income.
In another category of real estate investment, you do not own the property, you are not directly involved in property dealing matters. For instance, in REITs and Crowdfunding investment, you just invest your money and earn the shared profit.
Both categories have benefits and drawbacks. In traditional physical real estate investment, you need heavy upfront payment and as a result, you earn more profit and offer high returns. In alternative investment, with low finances, you can be part of this investment.
Types Of Real Estate Investment
Following are the 5 common types of real estate investment:
- Residential real estate investment
- Commercial real estate investment
- Industrial real estate investment
- Raw land investment
- REITs
Residential Real Estate
Simply, a place to live or a property to call home is a residential property. Single-family homes, condos, vacation homes, townhouses, or apartments are residential properties. In residential real estate investment, an investor can earn money through rent. By renting out a property, he can receive monthly rent from tenants, which can be the source of his passive income. In this type of investment, an investor has to take responsibility for regular maintenance of the property. Damage or poor condition of the property can reduce the value of the property.
Renting a property has its own set of benefits and drawbacks. Property can be appreciated over time and it can be the permanent source of steady income. At the same time, there are also some disadvantages like tenants can damage your property, and dealing with tenants can be hectic.
Commercial Real Estate
Commercial real estate is the property that is used for businesses. Office buildings, gas stations, a strip mall, lease restaurants, hotels, grocery stores, and even hospitals are true examples of commercial real estate. In this real estate investment, the owner of the property gets rent from the people who are running their businesses through these properties.
The rental amount of these properties is higher as compared to residential properties. Potential investors prefer to invest in commercial real estate investment because commercial properties usually have longer leased of 1 to 10 years.
Industrial Real Estate
Another popular type of real estate investment is industrial real estate. A huge building or larger area that is used for some industrial purposes or some sort of production, we can say the building used for product manufacturing, research, and development, production on a large scale, storage or distribution facilities are included in the industrial real estate.
An investor can be part of this investment with a massive income or heavy upfront amount. This type of investment plays a very positive role in the economic development of any country, it has a lot of contribution to the economic growth of the region.
Raw Land
Raw land investment refers to the investment in which you purchase land and build on it yourself. As an investor, you can build residential or commercial properties on this land. Sometimes raw land is also defined as undeveloped or agricultural land such as farms, timberland, ranges, or gardens.
The raw land investment is successful for those investors who have sufficient knowledge of the real estate business and have a large amount of income to invest. For beginners or investors with low financial resources, raw land investment is not a good choice.
REITs
If you want to enrich your portfolio in the real estate business excluding the direct involvement in real estate transactions then REITs are the best option for you. In REITs or real estate investment trusts, renowned companies own properties like hotels, offices, malls, restaurants, stores, or hospitals and you invest in the shares of these companies, and these companies are bound to give 90% of their taxable income to the shareholders per year.
The major attraction for investors in REITs is liquidity, they offer more liquidity compared to other investments: Suddenly, if you need money, as a shareholder you can sell your shares and get your money immediately.
Final Verdicts
Which type of investment suits you and is best for you depends upon many factors: the amount to invest, your experience in the real estate business, the market value of the property in your defined region, and demand for the type of property in a specific area also plays a pivotal role in making your investment more successful. Before finalizing your investment decision, it is important to conduct deep research about the market. Every type of property has advantages and considerations so investors should carefully analyze their goals, risk tolerance, and market conditions.
Source : https://erehomes.ae/
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