Types of real estate investment properties
Real estate investment strategies have undergone major changes in the last four years. Before the banking crisis and economic downturn, many investors made massive profits by rehabbing distressed properties and participating in home flips. Today, investors use distressed properties to generate rental income or offer creative financing options.
The first step to success in real estate investing is educating yourself about the market. Investors should become familiar with the various types of investment properties, such as residential, commercial, and vacant land, as well as investing in real estate notes and land contracts.
Residential real estate may be used as rental property or offered for sale. Many investors are offering creative financing strategies to attract buyers who may not qualify for bank financing. Popular financing options include lease purchase option agreements and seller’s pass-through mortgages.
Commercial real estate includes a wide mix of properties, such as condominiums and apartment complexes, retail stores, warehouses, and office buildings. Investors often partner with other investors or investment groups when purchasing commercial properties to cover the costs and management duties necessary to maintain investment properties.
Commercial property has the potential to generate substantial profits as long as investors assess market conditions. Investors may be eligible for tax incentives when business investments create employment opportunities in the area or when properties are upgraded using energy-efficient technology, such as solar panels or other forms of green energy.
Investors often seek out bank-owned foreclosure properties because this type of real estate is typically priced well below market value. Bank-owned real estate encompasses all types of properties and can range from mobile homes to luxury high-rise apartments to industrial parks and golf courses.
Locating residential and commercial foreclosures is relatively simple. Using the services of a real estate agent can speed up the process. Agents can access the Multiple Listing Database (MLS) to quickly locate all types of properties for sale.
Once the properties are repossessed by the banks, they are first put up for sale through public or government auctions. The property is returned to the bank if it does not sell at auction. Banks then sell foreclosed properties through their loss mitigation division or local real estate agents.
Bank property prices are generally higher than properties sold through auction. However, banks remove liens and judgments in order to sell real estate with a clear title. Buyers can take possession quickly and can move forward with preparing the property for sale or rent.
Many investors are purchasing residential properties through Fannie Mae’s Homepath Mortgage program. In addition to selling homes at deeply discounted prices, Homepath Mortgage offers low down payment requirements and special financing options for both individual buyers and real estate investors.
Many Fannie Mae properties qualify for grants offered through HUD’s Neighborhood Stabilization Program. NSP grants are offered to improve properties located in areas with a high rate of foreclosures. Qualified investors can obtain up to five NSP grants.
Investors investing in commercial real estate should educate themselves on federal, state, and county property laws. Commercial buildings must comply with the Americans with Disabilities Act and be zoned for commercial use.
Although the real estate market continues to spiral down, there are still plenty of solid investment opportunities. Investors must be aware of market conditions and be able to change strategies when necessary. Otherwise, they will quickly become another real estate statistic.