Different Types of Real Estate Investments
By Keren P. —
Published March 04, 2018
Real estate has always been one of the most popular and beneficial asset classes for investments. Perhaps, this is because people have a lot of choices in the type of investment they can make. While many new and young investors know just how beneficial real estate investment can be, they may not be aware of the options available to them. While location is an important criterion, it is not the only thing you should take into account when it comes to real estate investment. The type of property you wish to invest in is an equally important factor. Each has its own pros and cons, and you can choose one that would be most profitable for your current situation. Here are the five different types of real estate investments, explained in detail: • Traditional/residential property investmentsOne of the most common types of real estate investments, traditional/residential rental investments means that you, as an investor, buy a residential property or a family home, and rents it out to a family or an individual who pays you a set fee. These properties can include houses, townhouses, vacation houses or apartment buildings. A rental agreement or lease agreement is signed between you (the owner) and tenant, which determines how long they can stay for. Another option is to sell a residential property again after you buy it. instead of renting it out, you sell it again at a higher price when the time is right. Although all real estate properties will appreciate in value with time, the better the location, the higher the appreciation will be. • Commercial/office real estate investment Commercial real estate or office property investments can also yield profitable ROIs. Such properties include office buildings, skyscrapers or any other real estate that is rented by a business entity, and not an individual. Usually, these are the most profitable because, as mentioned before, a business entity is your tenant, rather than a single individual or a family. With businesses in every industry booming, the demand for office space will only rise, making commercial/office real estate investment even more beneficial than it already is. However, the performance of this type of real estate investment is highly dependent on the economic performance. • Retail property investmentThese types of real estate include shopping malls, shopping plazas or strip malls, and retail storefronts. As of now, renting out spaces in strip malls are more popular than enclosed shopping malls, as they tend to have more space, and are easy to see and access for any passer-by on the roads. Another investment option for retail properties is wholesaling. In these investments, you, as an investor, enters into a contract or agreement with a seller, and the contract is then assigned to a buyer. It will be sold at a higher price than what you bought it for, as this is how you make a profit. • Industrial property investmentIndustrial property investment can include any building that is used for industrial purposes like manufacturing, warehousing, distribution centres, research and development, and more. Usually, these types of investments require a relatively smaller amount of money for investing as well as for operation, and they do not require much maintenance and management. Functionality, location, configuration of the building, loading, and so on are some of the most important factors to consider. • Multi-family residential real estate investmentSome may consider this a part of residential real estate investment, but because of the sheer amount of profit it induces and its popularity, we will be treating it as a separate category. Basically, it includes a number of units (usually not more than five) in the same building, with each unit rented out or bought by a single family or individual. This can prove to be extremely profitable as there are a number of tenants paying rent to the owner. Even if one unit is vacant, cash will still flow from other units.