| Entity |
Advantages |
Disadvantages |
| Trailer
& Weekly Rentals |
*
Cash flow is great
* The amount you have to invest to get started is
minimal
* The return that your get on your cash flow is good |
*
You deal with a lot of management hassles,
transitions, and turnover.
* You will spend money to keep the cash coming in.
* Analyze the situation well, and make sure you count
your time & money so you can make a good return on
your investment. |
| Single
Family Homes |
*
They are easy to rent
* They are easy to sell
* They appreciate fairly nicely |
*
If you own a little house here and little house there
on scattered sites, they are management-intensive.
* If your tenants are low and moderate income (or at
any level of income) and you do not screen them well,
you may face plenty of repairs when they move out. |
Condo-
miniums |
*
Condos are fairly easy to rent. Sometimes they
are easy to sell but not as easy as single family
homes.
* Condo owners are only responsible for the interior;
common areas are kept up by the management
association. |
*
Maintenance and management fees range from $60 to $300
a month to cover insurance and upkeep of common
areas. These sometimes eat into your cash flow. |
| Duplexes,
Triplexes, Quadruplexes |
*
They are easy to finance most of the time because they
are deemed residential R.E. This means that
anything with fewer than four units can be financed
through a residential loan, so they are easier to
finance. Remember that properties that are easy
to finance are easy to buy and sell.
* They have more than one unit bringing in rent, which
helps they cash flow.
* They are fairly easy to rent because people would
rather live with 1 or 2 neighbors than with 400 in a
large apartment building. |
*
They are harder to sell than houses in a slow
market. Single family, three-bedroom homes are
the easiest group to sell.
* They are harder to finance than single family homes.
* Their biggest disadvantage is also one of their
advantages: because more people are paying rent, collecting rent
become complicated. Rent paying situation
creates more turnovers, more repairs, more phone
calls, and more management headaches. |
| Small
Apartment Buildings 5 to 100 |
*
You receive great cash flow
* You can usually hire an on site manager to take care
of things because all of the tenant live in one place
and are not scattered.
* You can have economies of scale because the entire
apartment is in one place. |
*
As the number of units goes up, vacancy and repair
rates go up, which translate into more turnovers, more
repairs, more people, and more headaches.
* It is harder to sell an apartment building than a
home if the market goes bad because it is an
investment property.
* It is more difficult to find financing for an
apartment building than for a home. Rarely will
a bank or mortgage company loan more than 60% to 80%
of the purchase price of a small apartment building. |
| Large
Apartment Building |
*
Provide economies of scale.
* They are easy to manage with all the tenants in one
place. Finding great deals on apt. bldgs.
becomes more competitive with 100 to 200 unit
complexes because many large commercial companies
invest in these. Then you may be competing
against large real estate companies and institutes
with tremendous amounts of capital. However,
many RE investors profit well from the small complexes
that have 10 to 50 units. |
*
They can be hard to finance because of size.
* They can be tough to sell in a down market. |
| Commercial
Property strip ctr., office bldg., commercial
warehouse |
*
The tenants generally take care of all the repairs,
unlike in residential properties.
* The rents can be lucrative, especially for big
spaces. |
*
It's more difficult to finance than a residential
property.
* It often requires time to find another tenant that
suits the space. This means that you have to be
willing to pay the note or pay the costs, taxes, and
insurance while the space becomes rented and retooled
for a new tenant.
* Stays empty longer than residential property when
the economy is down. |
| Land
Development |
*
A land development gives you the potential for
tremendous profit because you are dealing with a
bigger chunk of land.
* A land development will likely increase in value,
especially if you improve it with roads and services. |
*
You have to have real money because that land does not
produce any income.
* You have costs (e.g. mortgage, taxes, and insurance)
while you are holding the land.
* You can sell easily in prosperous times; however, in
hard times, you may have difficulty selling it. |
