Pros and Cons of the 8 Real Estate Investment Types

Investing in real estate could be a very smart financial decision with proper planning and budgeting. Real estate tends to appreciate in value over time, can act as a hedge against stock market volatility, offers great tax advantages and also can provide a stable monthly income. 

Pros: Short-term rental properties, otherwise known as vacation rentals, can act as one of the best ways to generate significant income from your real estate holdings.

1. Short-Term Rentals

Cons: You also run the possibility of having your short-term rental remain empty for long periods of time, especially during the off-season. This could lead to lost income if your budget does not reflect this eventuality.

1. Short-Term Rentals

Pros: Long-term rentals provide more stability for owners than short-term because they usually come with leases lasting for a year or more. They also provide investors with a steady flow of monthly income via tenants’ rent payments.

2. Long-Term Rentals

Cons: Purchasing your first long-term rental property can also require a significant amount of capital upfront, especially if you choose to pay cash for your rental properties, though financing options exist under different terms than a conventional owner-occupied mortgage.

2. Long-Term Rentals

Pros: If you find an off-market property that looks like it’s in bad shape, you may be able to approach the owner directly and close the sale without a realtor (and avoid commission fees).

3. Fix and Flip

Cons: Buying an outdated property in the hopes of turning a profit can also quickly go wrong if the house has more damage than you initially expected. You will also likely need to obtain a hard money loan using the property as collateral, as opposed to funding the purchase with a mortgage. 

3. Fix and Flip

Pros: House hacking can serve as a particularly good move for young adults looking for an investment. House hackers purchase a duplex, triplex or fourplex and then live in one unit while renting the others out to tenants.

4. House Hacking

Cons: Like long-term rentals, house hacking requires investors to act as a landlord, meaning they will carry responsibility for any problems and repairs.

4. House Hacking

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