Types Of Real Estate Investments To Know

Real estate investment options come in various forms, from rental properties and commercial developments to REITs and timeshares. The real estate industry offers many avenues for both active and passive investment, depending on your risk tolerance and experience level. As with any investment, it’s important to understand the pros and cons of each option to make informed decisions.

Residential Rentals: An Ideal Entry Point

If you’re just getting started with real estate investing, buying and renting out residential property is often the most straightforward approach. You can purchase rental homes, condos, or apartments, then lease them out to long-term tenants for income. As a landlord, you’re responsible for managing the rental, including vetting and approving tenants, maintenance, and ensuring rent payments are made on time.


While residential rentals can generate steady cash flow and long-term value, they also involve more work than other options. The property is also subject to risks like tenants damaging the home or nonpayment of rent. You may also have difficulty finding qualified tenants in some locations.

Commercial Property: Riskier But Potentially More Lucrative

Buying a commercial property like office buildings, industrial warehouses, and retail centers offer the opportunity for higher returns compared to residential rentals but also higher risks. Lease terms for commercial space are often longer, from 3 to 10 years or more for major tenants. So while leasing out a large commercial property can provide a stable income for a long period, vacancies can last longer if a tenant moves out. Commercial property is also affected by economic downturns as businesses may close or downsize their space during recessions.

Real Estate Syndication: Joining Forces To Invest

Real estate syndication involves pooling funds from multiple investors to purchase a property that may otherwise be too expensive for any individual investor to buy themselves. Syndications are common for large commercial properties and new multi-family housing developments. Investors earn a share of the rental income and profits from the syndicated property.

REITs: Instant Diversification

Real estate investment trusts or REITs provide a way to invest in real estate without the hassle of owning and managing properties yourself. REITs own and operate income-producing real estate such as office buildings, shopping malls, apartments, and hotels. By investing in REITs, you gain exposure to the REIT’s portfolio of properties and earnings. Publicly traded REITs are listed on major stock exchanges, so you can buy and sell them like stocks through a brokerage account. Returns are generated through property income and potential share price growth over time.

Timeshares: More Vacation Than Investment

A timeshare allows you to purchase rights to use a vacation accommodation, typically resort condominium units, for a specific period each year. While timeshare companies bill the properties as real estate investments, most do not actually go up significantly in value over time after adjusting for inflation. Annual maintenance fees also eat into any potential returns. As a result, timeshares are generally a worse investment option compared to other types of real estate but can still be appealing for those wanting an affordable vacation home.

To Wrap Up

There are several real estate investment vehicles to consider, from active options like renting out properties to more passive investing through syndications and REITs. The best approach for you depends on your financial goals, risk tolerance, and how involved you want to be as an investor. But with multiple ways to gain exposure to the real estate market, now is a great time to invest in this asset class.

By sweety