Purchasing land does not initially lead to cash flow. Fortunately, for many who aren’t looking for an immediate turn around, buying raw land can be a great way to add value to existing properties or it can be divided into separate plots and sold for the creation of subdivisions.
Something about this one makes us think of the game Monopoly, but purchasing in the right to use the minerals, water, oil, gas etc. on a property can be an excellent investment choice for a beginner.
Most strike out to invest in single family homes for their first real estate investment. With homes being intended for the purpose of one family to rent, there’s less need to advertise to fill vacancies, late night maintenance calls, and they’re the easiest to sell or finance for purchase. However, less cash flow is produced by single family homes, as they only have the one rent payment coming in every month while there is still a mortgage, and maintenance fees going out.
Small multifamily properties (2-4 units) yield much more cash flow for investors, and those who have the time to manage properties are best suited to try their hand at purchasing these units. Easy financing and all of the benefits that come along with purchasing a single family home, these properties are a solid investment with multiple opportunities for cash flow.
Small apartment buildings are made up of between 5-50 units. These properties can be more difficult to finance, as they rely on commercial lending standards instead of residential lending standards. If you make the financing cut, these properties can pay off in a big way. They’re too small for large, professional REIT’s to invest in but too large for the average beginning investor. These properties vary in value, as the more opportunity for income they bring in, the higher the value. Purchasing these properties in prime neighborhoods with a stable renting climate is one of the best ways to invest in real estate. For a property this size you are going to want to invest in hiring an on-sight property manager, which can make this investment almost completely “passive” as you will not have to work to collect rent, maintain the facility, or deal with tenant issues.