Real estate is one of the most reliable and time-tested ways to build wealth. But “real estate investing” isn’t one-size-fits-all—there are many different types of investments, each with its own risks, returns, and strategies. Whether you’re just starting out or looking to diversify your portfolio, understanding the full range of options is essential.
In this guide, we break down the most common types of real estate investments, explain how each works, and who they’re best suited for.
Key Takeaways:
There are 10 main types of real estate investments, each with unique risks, returns, and strategies.
Options range from residential rentals and REITs to flipping houses and 1031 exchanges.
Passive investors can benefit from REITs, ETFs, or crowdfunding, while active investors might prefer rentals or development.
Understanding your investment goals is key to choosing the right real estate strategy.
1. Residential Real Estate
What it is: Properties designed for people to live in—think single-family homes, condos, duplexes, or apartment buildings.
Why investors like it:
It’s the most familiar type of real estate for most people.
There’s strong and consistent demand for housing.
It offers recurring rental income and long-term appreciation.
How it works:
You purchase a home or multi-unit property, rent it out to tenants, and collect monthly income. Over time, the property may increase in value. Many investors also use mortgages to increase leverage.
Best for: Beginners, long-term investors, and those looking for steady cash flow.
Buying a single-family home to rent out is one of the most straightforward ways to invest in real estate. — Investopedia
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2. Commercial Real Estate
What it is: Properties used for business purposes—like office buildings, strip malls, retail centers, or hotels.
Why investors like it:
High potential returns.
Tenants often sign long-term leases.
Businesses typically handle much of the maintenance.
How it works:
You lease space to businesses and collect rent, often with built-in annual increases. These leases can be more complex, but they offer stability and strong income.
Best for: Experienced investors or those working with a property manager.
Commercial real estate typically offers high-income potential and longer leases than residential properties. — Investopedia
3. Industrial Real Estate
What it is: Properties used for manufacturing, production, distribution, and storage—like warehouses or factories.
Why investors like it:
Reliable tenants with long leases.
Minimal tenant turnover.
Often easier to manage.
How it works:
Tenants use the space for logistics or production. These properties are in high demand, especially due to the rise of e-commerce.
Best for: Investors seeking stability with fewer management headaches.
Industrial properties are vital for supply chains and often yield consistent cash flow. — NerdWallet
4. Raw Land
What it is: Undeveloped land with no buildings or infrastructure.
Why investors like it:
It’s relatively cheap.
You can hold it for long-term appreciation or develop it.
It offers flexible exit strategies.
How it works:
Buy a parcel, hold it, and sell later for profit—or develop it into residential or commercial space.
Best for: Patient investors willing to wait for long-term growth.
Raw land investment involves zoning research, development plans, and patience. — RE/MAX Gold
5. Real Estate Investment Trusts (REITs)
What it is: Public or private companies that own income-producing properties—such as malls, apartments, and data centers.
Why investors like it:
No need to buy or manage property yourself.
Easily tradable like stocks.
Pays dividends regularly.
How it works:
You invest by purchasing shares in a REIT. These companies collect rent and distribute profits to shareholders.
Best for: Passive investors or those without much capital.
REITs allow investors to buy shares in commercial real estate portfolios. — Investopedia
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6. Real Estate Crowdfunding
What it is: A way for many investors to pool money online and invest in large real estate deals.
Why investors like it:
Low minimum investment.
Access to institutional-quality properties.
Can diversify across multiple projects.
How it works:
You invest through a crowdfunding platform in a specific property or fund. In return, you receive shares and earn income if the deal performs well.
Best for: Investors with limited capital looking to diversify.
Crowdfunding opens real estate deals to small investors through fractional shares. — NerdWallet
7. Real Estate Mutual Funds and ETFs
What it is: Pooled funds that invest in REITs or real estate-related companies.
Why investors like it:
Professionally managed portfolios.
Diversification across many assets.
Liquidity and simplicity.
How it works:
Buy shares in a fund that invests in REITs or property-related companies. The fund may track a real estate index or focus on a specific sector.
Best for: Stock market investors who want real estate exposure.
Real estate ETFs and mutual funds give investors broad market exposure with liquidity. — Investopedia
8. Real Estate Development
What it is: Buying land or rundown properties and building or renovating to sell or lease at a profit.
Why investors like it:
High potential returns.
Opportunity to create value from scratch.
Often used in large-scale projects.
How it works:
Developers acquire land, secure permits, build or renovate, then sell or lease the final product.
Best for: High-risk-tolerant investors with capital and experience.
Development investments can transform raw land into income-generating properties. — CFA Institute
9. House Flipping
What it is: Buying undervalued homes, fixing them up, and reselling for a profit.
Why investors like it:
Short investment cycle.
High potential ROI if done right.
Hands-on, active investment strategy.
How it works:
You identify a property below market value, renovate it quickly, and list it for sale at a higher price.
Best for: Experienced investors or contractors.
Flipping homes can yield quick returns but carries risks from unexpected costs. — Investopedia
10. 1031 Exchange
What it is: A strategy to defer capital gains taxes when selling one investment property and buying another.
Why investors like it:
Allows portfolio growth without immediate tax hit.
Powerful for long-term wealth building.
Encourages reinvestment.
How it works:
You sell a property and reinvest the proceeds in a similar (“like-kind”) property within strict IRS timelines.
Best for: Long-term investors looking to scale without triggering taxes.
A 1031 exchange lets investors defer taxes by rolling profits into a new investment. — CFA Institute
Final Thoughts
Real estate offers multiple paths to wealth—but knowing the right path for your situation makes all the difference. From hands-on approaches like rentals and flipping to passive options like REITs and funds, there’s something for every investor.
At GPS Renting, we specialize in helping real estate investors find, manage, and grow their rental portfolios—especially in the thriving Seattle and Eastside markets. Whether you need help managing a single-family rental or scaling your investments, our team provides the local expertise and full-service support to make it happen.
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