Investment Property
Investment Property can be a great tool for building wealth. But a question that I’m commonly asked is “What sort of Investment Property is best?”.
There are plenty of options, and each one has its own unique strengths and weaknesses.
Here are some insights into 5 Investment Property options you may consider when you look for your next Investment Property, and some insights into each.
Investment Property Option #1 – Residential
By far, the most common and well-known way to invest in property is to buy residential property.
Without wanting to state the obvious, almost everyone lives in some form of house – so there’s always going to be a demand for residential real estate. That means it’s relatively easy to find tenants when renting out your property, or buyers when you’re selling.
Plus, because there is so much residential Investment Property out there, there are always potential deals to be found.
But a down-side of residential Investment Property is that it generally doesn’t attract the high rental yields that Commercial or Industrial property can.
Investment Property Option #2 – Commercial and Industrial
Commercial Investment Property (such as shops and offices) and Industrial Investment Property (such as warehouses and factories) can generate great rental yields.
But in times of low business growth, it’s not uncommon for a commercial or industrial property to remain vacant for months – or even years. Having good management skills and a property which is attractive to potential tenants can help counteract this, but the potential risk of months or years without receiving rents always exists.
Another benefit of commercial and industrial property is that the tenant pays all the outgoings. That means unlike under a residential Investment Property tenancy, most commercial or industrial leases will require the tenant to pay for their own electricity, water and council rates.
As a result, these costs don’t eat into your cash flow.
Investment Property Option #3 – Land
Generally, the benefit of land is its future potential to be developed. That means, unless you plan on developing the land to create your profits, you will be banking on the value of the land rising in order to make your profits.
It’s a common trap to think that just because land may be vacant, that it isn’t going to cost anything to own.
Unfortunately there are still council rates to pay as well as other potential costs (such as liability insurance and land taxes), and with no rents coming in the door, these costs have to come out of your own pocket.
Of course there are some strategies for profiting from land in the short term (ie – leasing it out for farming, agistment etc) but in most cases the land will cost you money to hold.
Investment Property Option #4 – Overseas Real Estate
Many investors are attracted to offshore real estate markets by the lure of higher returns.
While this can be true, there can be some major differences between investing overseas and investing close to home… and making a mistake when it comes to investing can be costly!
That’s why it’s wise to leave off your plans to invest in overseas real estate until you’ve had some real estate investing experience, and even then to do your due diligence carefully over potential deals.
Investment Property Option #5 – Other Niche Real Estate
There are plenty of other niche investment properties out there which don’t fit into the categories I’ve listed above.
These can include car parks, billboards on their own land, boarding houses and self storage units.
The attraction of these investments is that they generally deliver a higher cashflow return-on-investment.
But as Investment Property, because these niches are so ‘little known’, you do have an added level of risk by investing in these sorts of real estate.
This added risk is mainly to do with the unpredictability of the asset. The returns are so high in niche real estate because so few people invest in it. However, the very fact that so few people invest in niche real estate means deals can be difficult to sell. That means the value of the underlying asset is unpredictable.
Free 10-Part Mini-Course
I hope this article has provided you with some eye-opening investing insights.
If you’d like to learn more about Investment Property, and making money from real estate, then I would encourage you to sign up to my 10-Part Mini-Course on making massive profits on real estate.
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