Different Types of Real Estate Investment – Which One is for You?
Many new investors in real estate know that it is one of the oldest but still most popular asset classes. However, not all of them know that there are actually different types of real estate investment. Naturally, every type of real estate investment comes with its own potential pros and cons, including some quirks in cash flow cycles, standards, and lending traditions.
If you’re ready to acquire, own, or flip real estate, then you better familiarize yourself with the different types that you can choose from
Residential real estate investments include houses, apartments, townhouses, and vacation homes where an individual or a family pays rent to live in. How long they are going to stay in your rental property is based on your rental agreement or lease agreement as it is also called.
Commercial real estate investments are often office buildings and skyscrapers. If you are going to invest some of your savings in the construction of a small building with a number of individual offices, those can be leased out to business owners who can pay for the use of the space. Usually, commercial leases last for a few years, so they can be more stable even if rental rates in the area decline. The downside is, even if the rental rates in the area increase, you may not ask for a higher rent as you are bound by old agreements.
Industrial real estate investments include storage units, car washes, and industrial warehouses that are leased either long-term or temporarily. Industrial real estate investments usually have fees and service revenue streams that could increase return on investment for the owner.
Retail real estate investments consist of retail storefronts, as well as strip malls, and shopping malls. There are cases where landlords get a percentage of sales generated by the tenant on top of the rent. This is usually given as a form of incentive to keep their property in excellent condition.
Multi-use real estate investments or mixed-use properties include those that can be a combination of any of the mentioned categories into just one project. For instance, you can invest in a mixed-use building where the upper floors are for residential use while the ground floor units are for offices or retail shops.
There are also other ways that you can make an investment in real estate even if you don’t want to deal with actual properties. Real estate investment trust is an example. You can buy shares of a corporation that owns properties and distributes income as dividends. This type of investment means complex taxes, so you would have to be ready to deal with that.
So do you know what type of real estate investment you want to go for? Which one do you think will work for you?
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