Should I Diversify By Investing In Different Property Types?

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One of the most common questions we get at Glassridge, from beginning to experienced Investors alike, is whether one should acquire, work with, and/or hold different property types in their real estate investment portfolio.

Is it a good idea to invest in Single Family Residences, Apartment Buildings, and Commercial Properties?

Or is it smarter to stick to one single property type, and only aim to master the one?

This is ultimately a difficult decision that must be left up to each individual real estate investor, however we do have several key pointers I can recommend considering. Continued

Types Of Investment Properties: Raw Land

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Raw Land is one of the simplest types of property to understand (no buildings), but can be one of the more difficult to turn to a positive ROI. The most common uses of Raw Land depend on its location, plot size, utilities access, climate, vegetation, and grading. Some common ways investors earn positive ROI from Raw Land include:

  • Residential development. Sub-dividing the plot to build houses or multi-family apartments, then selling or leasing the residences.
  • Commercial development. Building Offices, Retail, or Industrial structures on the land, then selling or leasing them to business tenants.
  • Agricultural development. Developing the land for farming purposes, and either farming it directly or leasing it to farmers to be cultivated.

Raw Land is really only suitable for experienced investors who understand the nuances of building & development, since it will require multiple steps from permitting, to architectural planning, to materials sourcing, to actual construction. Each step in the process requires special expertise and can rack up significant lost costs if not carefully planned & managed.

Types Of Investment Properties: Commercial Real Estate

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Office Building, Retail Property, and Industrial Real Estate Investing

Commercial real estate encompasses a variety of different property types, and is one of the largest investment asset classes on the planet. Commercial properties can range from small shops to downtown office buildings & skyscrapers.

The obvious factor that sets commercial real estate apart is that it is owned for-profit by its investor(s). By this definition, many would also categorize 5+ unit apartment buildings as commercial real estate (and even technically 1 – 4 unit rental properties that are non-owner-occupied).

However, since there are many specific factors unique to residential properties not found in business-use commercial properties, for our purposes commercial real estate can be defined as:

Non-residential, business-use real estate.

Specifically, that includes: Continued

Types Of Investment Properties: Multi Family Real Estate

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This section is divided into two main components.

First, we examine the 2 – 4 unit multiplex properties. These are treated as their own unique category especially due to the way they’re treated by the US Federal Government.

Then, we focus on the mother of all multi family properties: apartment building investments. Apartment buildings are one of the best, but also one of the trickiest, real estate asset classes to invest in.

We’ll examine a bit about both categories below. Continued

Types Of Investment Properties: Single Family Residences (SFRs)

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Investing Into Single Family Homes – Single Family Home Investments

The most common type of real estate investment property for beginners is a Single Family Residence or SFR. An SFR is your typical single family house, and can range from sub-$20k starter homes to multi-million dollar mansions.

There are 3 big positives when it comes to investing in SFRs: Continued

Real Estate Investing 101

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A Brief Introduction To Real Estate Investment Financing

If you’re new to real estate investing, this section is the place to start. In it, we’ll cover some of the most important fundamentals needed before even considering borrowing private funds.

Some of those fundamentals will include:

  • Foundational thoughts on the two primary real estate ownership strategies: Fix & Flip vs. Buy & Hold.
  • The different types of investment properties, including some of the pros & cons specific to each property type.
  • A comparison of all-cash purchases vs. real estate financing (including traditional & alternative finance options).

In general, this will be a highly condensed overview of real estate investing. Continued