Quiz: Property Types | Covey Learn

1. Which property type typically offers the lowest barrier to entry for a first-time investor?

Class A multifamily (100+ units)Single-family rental in a suburban marketRaw land without entitlementsTriple-net commercial lease property

Single-family rentals have conventional financing available (3.5-25% down), the largest pool of comparable sales data, and the simplest management profile. Commercial and multifamily require larger down payments, more complex underwriting, and specialized lenders.

2. A duplex where the owner lives in one unit and rents the other is an example of:

Commercial real estate investingHouse hacking with an owner-occupied multifamilyA triple-net lease arrangementA REIT investment

Living in one unit of a small multifamily (2-4 units) while renting the others is house hacking. It qualifies for owner-occupied financing (lower rates, lower down payment) while generating rental income to offset or eliminate your housing cost.

3. Raw land as an investment typically carries higher risk because:

It always decreases in valueIt generates no income while you hold it, has no depreciation benefit, and is difficult to financeBanks refuse to accept land as collateralZoning never changes

Land produces zero cash flow while you hold it, offers no depreciation deduction, typically requires 50%+ down for financing, and its value depends entirely on future development potential. You're paying carrying costs (taxes, insurance) with no offsetting income.

4. The key distinction between residential (1-4 units) and commercial (5+ units) property is:

Commercial always costs moreCommercial is valued primarily on income (NOI and cap rate) while residential is valued on comparable salesResidential property never appreciatesCommercial property cannot have tenants

Properties with 5+ units are valued using income approaches (NOI / cap rate = value). This means you can directly force appreciation by increasing income or reducing expenses. Residential (1-4 units) is valued primarily by what similar nearby homes sold for.

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