Types of Real Estate Investing

Although there are many ways to invest in real estate, real estate investing can be divided into three main types. Below are the three main types of real estate investing explained.

The first type of real estate investing

The first type of real estate investing is when the real estate investor buys a property, fixes it up, and sells it, then does the same to another property. Most homeowners, even if they aren't trying to be real estate investors, fall into this category. Those who sell their homes in worse shape than when they bought it simply don't know the value of taking care of their real estate investment. Those who develop the property to its maximum likely value, and then move on to another property quickly are good at this method. Some people actually make a living out of this real estate investment method alone, just moving into and fixing up one house at a time. Fixer Uppers and foreclosure real estate investments would fall under this category.

The second type of real estate investing

The second type of real estate investing is when the real estate investor buys a piece of real estate property and rents it out for monthly income. Even in a one-bedroom unit, this is considered commercial real estate investing. The laws and health codes make this type of real estate investing a much more intensive method. It would be very difficult to be a landlord and hold a full-time job elsewhere. Still, judging by the number of apartments, homes for rent, and condos around, it is obviously a very lucrative way to invest in real estate.

The third type of real estate investing

The third type of real estate investing is when the real estate investor joins (buying into) a group of real estate investors, as a limited partner. This partnership will have a 'general partner' who handles the day to day affairs of the job, and the real estate investors, as a limited partners, don't have to have any landlord responsibilities, but meanwhile enjoy the income, tax write-offs, and growth of returns.

This way, you won't have to spend time and energy to take care of the properties yourself, yet can enjoy the benefits of Real Estate Investing. Many real estate investors find that this is a great trade-off because they can have a full-time career additional to this real estate investment. Still, part of the control is taken out of their hands, so it still equals out.

There are certainly more advanced versions of all three types of real estate investments, but basically all home investing boils down to these areas. What you're probably anxious to learn about now though is how profitable it can be. If not, skip on down to the Pros & Cons section.