Different Types of Real Estate Investments

Marko Leon
January 07, 2021
Different Types of Real Estate Investments

When it comes to property investments, you will do wise to understand property categories first. That way, regardless of whether you want to develop, own, or flip real estate, you know what you’re signing up for. 

Here are some of the most common real estate investments categories. 

Commercial Property

In this day and age, we are programmed to associate commercial real estate with office buildings and skyscrapers. However, in reality, any real estate used exclusively for business instead of living space is a commercial property. For example, a hotel, a mall, and a winery would all constitute the commercial real estate.  

Commercial real estate can be used to start up your own business. But for the purposes of this article, we will only look into real estate investments. So, as far as real estate goes, you could purchase or rent a commercial building or business and lease it.   

The larger your investment, the larger the property.  And the larger the property, the higher the financial yield. One thing to keep in mind in terms of leasing a commercial property is multi-year leases. This isn’t an unusual occurrence in the field, but you have to be reasonable about it. If you agree to a multi-year lease, you are guaranteed a steady income and protected if the rent prices decline. On the other hand, if the rent prices increase, it may not be possible for you to raise the rates.   

Residential Property

Residential properties usually involve houses, apartment buildings, townhouses, vacation houses, and more. You can develop, flip, or purchase residential real estate. Either way, the idea is for you to make a profit from this property. You can do that by either selling or leasing the real estate.   

If you’re selling, it may take longer to find a buyer. However, the property value may rise in the meantime, enabling you to make a higher profit. Once you sell the house, your contributions to the tax authorities cease and become the new owner’s responsibility. 

If you’re leasing, you would want the property to be near you so that you can manage all the affairs that come with leasing a property. Otherwise, you would have to hire an agency to manage the affairs for you.   

Industrial Property  

Industrial property often falls under the umbrella of commercial real estate. We added it into its own category because there are just way too many variables between an apartment building and a warehouse.   

Industrial real estate consists of warehouses, car washes, hangars, storage units, and many more. The most important thing about industrial real estate is that it often has several revenue streams; however, it may also come with expensive maintenance fees. Make sure that you know exactly what you’re getting into.  

Final Thoughts  

At the end of the day, if you don’t want to deal with the properties yourself, there are many other ways that you can invest in real estate. Real estate investment trusts (REITs) are particularly popular in the community.   

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