How to Use the Equity in Your Home or Business Today to Invest for Tomorrow by Kristie Lorette

Author:Kristie Lorette
Language: eng
Format: epub
Tags: home equity, business equity, homeownership, building equity, investments, wealth building
Publisher: Atlantic Publishing Group
Published: 2012-09-20T00:00:00+00:00

The Pros and Cons of Each Type of Property

It is a reality that there are investors who make money with every type of real estate property they invest in. On the other hand, there are investors who lose money on every type of property they invest in. Beyond your knowledge of the investment property type, it is also important to note that the location of the property plays a big role in how profitable it can be. Nothing illustrates this point better than the real estate downturn that started in 2007. Some of the hardest hit areas included Florida, California, and Michigan. These are also the same three areas that saw the biggest spike in real estate values prior to that downturn. These markets were hot locations to buy property because investors knew that they could sell it for a profit at a later date, but when the real estate market tanked, it was at an even higher rate than other areas in the country. So although property type can determine how much money you can generate in income on a monthly basis or profit from when you sell it, the location of the property you invest in is just as important a factor to consider.

The question still remains: Which type of property is the best investment option for you? Learning about the pros and cons of each type of investment property permits you to get a better grasp on which one best fits your financial goals and investment options.

Rental apartments

Rental apartment investments range from owning one unit to owning an entire complex. Almost every community in the country has apartment rentals, but the best apartment rentals for investment purposes are in areas where the population consists of middle-income individuals and families. This demographic makes enough money to pay for rent, but not quite enough to buy their own apartment or home. While this is the ideal situation for owning apartment rentals, it is not the only one that is beneficial. Other areas where owning rental apartments or properties can be beneficial are in college towns or in areas where there is a high concentration of individuals or couples in their early 20s. These demographic groups are typically more inclined to rent than to buy because of a lower annual income.

The most beneficial aspect of owning apartment rentals is the future possibility of converting the units into condos (a.k.a, a condo conversion). It happened in Miami Beach in the late 1990s: Real estate developers and investors were scooping up rental apartment buildings — high rises and smaller complexes. While some buildings were completely gutted and rebuilt, others were renovated or kept exactly the same. After the condo conversion, units were sold for hundreds of thousands of dollars as compared to the meager monthly rental amounts typically running between $700 and $1,000 per month, depending on the size of the apartment. Remember that in a condo conversion situation, the units you are converting were rented out before the renovations and conversion.

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