Types of Investment Property

Almost any type of property can be an investment property.  From condos, townhouses, and single family homes to apartment complexes and commercial property, almost anything can be an investment.

Intended Term

  1. Short Term – Many investors, buy, renovate, and sell the property at a profit.  This allows them to move on an reinvest their money quickly while minimizing or avoiding paying major interest charges on leveraged money.
  2. Long Term – Some investors buy properties to use as rentals.  Using the collected rent to pay down loans frees up equity to leverage other projects or if saved, results in property owned free and clear that can continue to be rented for almost 100% profit or can be sold for a lump sum that can be used as a down payment on another investment.
  3. Medium Term – This involves a blend of the first two options.  Generally, this will involve renovating the property and renting it for a limited time.  This is often done in apartment complexes or condo buildings where renovations can be completed to one unit or building at a time, yielding a higher return for renovated units and resulting in a higher class property, fetching a higher sale price.

Type of Structure

  1. Single Family Home – This is the traditional house.  All one unit, when purchased as an investment property, single family homes are typically renovated and either rented or sold.
  2. Duplex/Triplex/Quadplex – These homes are independent structures split into multiple units that each have a separate exterior entrance.  Most often, these properties are renovated and rented at a profit.  The owner may or may not occupy one of the units.
  3. Condo/Townhouse – These can make great investment properties as the exterior maintenance is usually the responsibility of the Home Owners Association (HOA) and is paid for via a monthly fee.  They are very similar to single family homes and are an affordable way to get into the investment property market.  They make wonderful first homes (with investment property potential) as well.
  4. Apartment Complex – This would be a commercial transaction.  There are many options for investing in an apartment complex.  To determine what is the highest and best use, speak with a commercial real estate broker.

* The definition of residential properties varies by state.  In North Carolina, a single structure with 1-4 units is considered residential.  Five or more units puts a property into the commercial category.