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Investment Property Types Ranked by Risk Level

Camden • February 24, 2023


As a rental property investor, choosing the right investment property is crucial to ensure your success. There are various types of investment properties available in the market, each with their own level of risk.


It is important to understand these risks to make informed decisions about where to invest your money. Below, we rank different investment property types by their risk level and provide insights into each of them.


Understanding Investment Property Risk

It is essential to understand the concept of investment property risk itself and the types of risk.


Investment property risk refers to the likelihood of losing your investment or not getting the expected returns due to various factors such as economic conditions, property location, and tenant quality.


The risk level of an investment property is dependent on its type, location, current state of the economy, market demand, and more. In general, the higher the potential returns of an investment, the higher its risk level. However, there is no guarantee that higher risk will always lead to higher returns.

#1 Raw Land (Highest Risk)

Raw land is the riskiest type of investment property, as it has no income until it is developed or sold. Investors must conduct extensive research to determine the land's potential for future development, which can take years or even decades. Raw land investments can yield significant returns, but they require more time, effort, and resources to achieve.



Investing in raw land isn’t a bad idea, but we typically do not recommend it for inexperienced property investors.

#2 Vacation Rentals

Vacation rentals can be a lucrative investment opportunity but come with higher risk levels due to seasonality and economic volatility. They are also subject to changes in tourism trends, and the property must be maintained to attract guests continually. As such, investors must do their research and assess the location's market demand before investing in vacation rentals.

#3 Commercial Property

Commercial properties include office buildings, retail stores, and warehouses where tenants rent the space for commercial purposes (not to live). These types of investments can offer high returns but also come with some risk related to the uncertainty of market demand, tenant quality, and economic conditions.

#4 Multifamily Property

Multifamily property, also known as apartment buildings or complexes, are slightly more risky than single-family homes but are relatively low-risk and can offer higher potential returns. Our team at Joseph Thomas has lots of experience managing multifamily property of our own.


The risk level varies depending on the number of units in the building and the location. In general, larger complexes in high-demand areas have the potential for greater returns but also come with higher risk levels.

#5 Single Family Property (Lowest Risk)

Single family properties are usually the least risky investment property type. They are typically less expensive and easier to manage than other property types, making them ideal for first-time investors.


Single family homes are also in high demand in most markets, making them an excellent investment opportunity for investors looking for stable long-term returns.

Utah Property Management with Joseph Thomas


Understanding the risk level of an investment property is crucial to make informed decisions and minimize potential losses. No investment comes without any risk.


It's essential to carry out your due diligence in deciding how to invest in rental property in a way that aligns with your investment goals and risk tolerance.


One great way to help ensure a smooth and profitable real estate investment is to use an experienced property management partner. Our team of pros can handle all of your Utah property management needs. Give us a call!

How to Calculate How Much to Charge for Rent in Utah (2024)

By Camden • April 11, 2023
 As a landlord, one of the things you need to figure out is how much to charge your tenants for rent. You want to make sure you are getting the most out of your investment and generating positive cash flow, but you can’t charge so much that potential renters pass on your unit for cheaper options. Charging too low for rent not only means missing out on revenue, but it might also attract lower-quality tenants. There are a few different considerations to be made when calculating how much to charge for rent. As a property and tenant management company in Utah, here is our guide for Utah landlords. Based on Property's Value One method for calculating how much rent to charge is to base it off of your property’s value. A common rule of thumb in the industry is to settle on a monthly rental charge that is around 1% of the property’s market value. However, the rent amount for a higher-valued property probably needs to be less than 1% in order to attract enough tenants. It’s not uncommon to have good revenue-producing properties charging a monthly rate that is 0.5-.75% of the current market value. In a normal and stable Utah market, you’ll find that many rental properties charge rent near this range, give or take a bit, but there is no definitive “rule”.

What is the 2-out-of-5-years rule?

By Camden • July 7, 2022
The “2-out-of-5-years rule” is a rule related to the criteria that must be met in order for a property investor to avoid or reduce capital gains ... Avoiding Capital Gains Tax To understand the 2-out-of-5-years rule, you need to understand the desire for property owners to avoid or reduce taxes owed when they sell a property. To avoid paying more than they have to in taxes, many property investors take advantage of opportunities such as the 1031 exchange process or “home sale exclusion” tax breaks. The 2-out-of-5-years rule is one of the criteria that must be met in order to qualify for the home sale exclusion.

Emotional Support and Service Animal Laws in Utah

By Camden • June 29, 2022
 For anyone renting to tenants in Utah, it’s important to be aware of current laws regarding emotional support and service animals. This is a Utah landlord’s guide to animal laws to help you decide on your policies. Definition of an Emotional Support Animal in Utah Emotional support animals, often dogs or cats, help people with mental illnesses such as depression or anxiety by providing comfort or support. Emotional support animals (ESAs) are not trained to do special tasks like service animals. ESAs are not permitted to be in public places where pets are prohibited. The designation of an animal as an ESA is not something a renter can claim for themselves independently. Official ESAs must be prescribed and designated as such by a licensed mental health professional (see “ESA Letter” below ). Emotional Support Animal (ESA) Letter For a pet to be considered an emotional support animal under Utah law, the handler must have an official ESA Letter from a licensed mental health professional. Mental health professionals have screening measures to help determine if an individual qualifies for an emotional support animal. ESA’s have less rights than service animals, and are not covered under the American Disability Act. Definition of a Service Animal in Utah Service animals are animals that are trained or are being trained to provide some sort of service or carry out specific tasks for a person with a disability. Service animals must be permitted public accommodation with their handler. Although some animals such as miniature horses can sometimes be used as service animals in some states, only dogs may qualify as service animals under Utah disability rights law. Service dogs in Utah may be trained for tasks such as helping the deaf, blind or visually impaired, or seizure prone. There are also dogs that are specially trained to alert their handlers about the presence of dangerous allergens or to help with psychiatric services such as preventing self-harm, reminding handlers to take medication, or providing calming measures during psychological distress. Service animals are protected under the American Disability Act.
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