Rental properties are becoming a very popular investment among new and seasoned investors alike. Many individuals have been able to earn a second stream of income from investing in rental properties, and some have even gone on to make a career out of it. You don’t have to be a professional investor to invest in real estate, but you do have to do some research to determine the best ways for you to earn a profit from your investment. There are five major categories of real estate, and each one can be profitable— you just need to determine which type is (or which types are) best for you.

#1: Residential Real Estate

Residential real estate is probably the most common type that people invest in. Residential properties include single-family homes (and vacation rentals), duplexes, and quadruplexes. Typically, residential properties house anywhere between one and five families and allow you to collect rent from however many families you have in your dwelling.

Vacation rental properties work similarly to single-family homes, except that vacation rentals are considered short-term rentals (less than six months), and some areas have stricter rules regarding short-term rentals. Overall, investing in residential real estate offers many benefits, which is why many real estate investors start off with residential properties.

#2: Commercial Real Estate

Commercial properties are all properties where business is conducted. This includes industrial properties (sometimes counted as its own category) such as factories, warehouses, and power plants. Other examples of commercial property include restaurants, hotels, malls and shopping centers, and office buildings. 

Commercial real estate tends to be significantly more expensive than residential real estate. This is because they’re bigger buildings with more tenant space, but there is financing for commercial properties available to those looking to diversify their real estate investment portfolio.

#3: Mixed-use Properties

Like the name suggests, mixed-use properties are buildings that have more than one use. The most common type of mixed-use property usually has a residential component, as well as a commercial component. A good example would be businesses that have residential units upstairs or even apartment complexes— which are sometimes considered commercial property because they house more than five families. Mixed-use properties can be just as profitable as residential and commercial properties, but all tenants must understand what a mixed property is and adhere to all rules and requirements.

#4: Special Use Properties

Special use properties don’t typically fall into the category of commercial, residential, or mixed-use. The reason for this is that they are publicly held properties and pieces of land. Examples include schools, libraries, churches and other places of worship, government buildings, and public parks. Not too many first-time real estate investors tend to invest in special-use properties, but it is possible to purchase them.

#5: Agricultural Real Estate (Raw Land)

The last type of real estate that you can invest in is raw, undeveloped land. Raw land comes in many forms: farms, ranches, orchards, and just simply land that you can choose to hold as the property value goes up, or you can build residential, commercial, or mixed-use buildings. Purchasing raw land is a great way to diversify your real estate portfolio, and you can invest in the agriculture business to earn extra money from your land.

The type of real estate you choose to invest in is up to you. Each of these five types can prove to be very profitable to you; you just have to do your research to make sure that either property type will ensure some sort of return on your investment. No matter which type of real estate you choose to invest in, location is key. A good location is the best way to ensure that your property will turn a profit and even create a steady stream of income for you.

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