Investing in real estate is a great way to increase your wealth – if it is done responsibly, with an understanding of the tax implications and a conservative approach to financing. The following article was created as part of our eBook on the types of property investment for different age groups.
If you are considering investing in real estate, it’s important to narrow down what you’re looking for, and to buy according to your budget. Property size is a crucial factor in determining what type of investment is best for you. If you are a first time investor from a younger age demographic, it may be wise to start out with a smaller, more manageable property.
Categorizing Investments by Property Size (Wikipedia.org)
- Single Family Dwelling - A single-family detached home, also called a single-detached dwelling, single-family residence or separate house, is a freestanding residential building. It is defined in opposition to a multi-family residential dwelling.
- Small Apartment Building - An apartment or a flat is a self-contained housing unit (a type of residential real estate) that occupies only part of a building. Such a building may be called an apartment building, apartment complex, apartment house, block of flats, tower block, high-rise, or occasionally mansion block.
- High Rise or Large Building - A tower block, high-rise, apartment tower, residential tower, apartment block, block of flats, or office tower is a tall building or structure used as a residential and/or office building. In the United States, such a structure is referred to as an apartment building or office building, while a group of such buildings is called an apartment complex or office complex.
Truth be told, a larger property will always be a more solid and lucrative investment, especially in terms of capital growth and financial returns. This is because it will appeal to a larger demographic of buyers, and the selling process will be much easier since demand for larger properties is higher.
The same logic applies with smaller apartment buildings or single-family dwellings. If you’re thinking of buying a smaller investment property you should proceed with caution when applying for finance. It’s not uncommon for banks to have lending restrictions in place for properties that are not very large. This is because smaller properties are usually considered by financial institutions to be a high-risk loan.
If you have an interest in investing in real estate, there are a wide variety of potential market segments worthy of contemplation. These segments include single-family dwellings, small apartment buildings, high rises, and office complexes. Each of these categories varies greatly in price based upon factors such as location, risk, rental market conditions, and investor demand. Other relevant factors are the price per foot, the price per unit, the location, and the overall condition of the building.