Different Types of Real Estate Investment Properties
When exploring real estate investment opportunities, there are many different types of properties that you might purchase. Determining which type of property is right for you depends upon your investment goals. Here is a look at the various types of investment properties you might purchase.
Commercial Real Estate
Commercial real estate mostly consists of skyscrapers and office buildings. Considered the “flagship” investment for many real estate investors, commercial properties tend to be the largest and highest-profile property type. As the owner of a commercial property investment, you will likely rent out individual office space within your building to other companies. You may focus primarily on large corporations, small business owners or a combination of both.
While commercial real estate can be expensive to obtain, you are more likely to obtain multi-year leases with your tenants. As a result, you can enjoy greater stability with your cash flow. It is important to note, however, that these buildings do tend to have high operating costs.
Industrial Real Estate
Industrial real estate investments, which include everything from distribution centers to industrial warehouses, are often considered to be the “staple” for real estate investors. This type of property may generate income from customers who use the facilities for only a short period of time, which may be the case with a distribution center, or for a longer period of time, which may be the case with a research and development facility.
Unlike commercial property, industrial real estate typically requires a smaller investment and lower operating costs. You may, however, need to add office space or other extra features to the property in order to increase the return on investment.
Retail Real Estate
Retail real estate includes items such as strip malls, shopping malls and other retail storefronts. Many retail properties have an anchor store, which is a large well-known retailer that serves as the major customer draw to the area. In addition to charging rent for a retailer to occupy the space, some retail real estate landlords also receive a percentage of the sales generated in the store. Not only does this provide additional income, but it also gives you a greater incentive to keep the property in the best condition possible.
Residential Real Estate
Residential real estate includes houses, townhouses, apartment buildings and vacation homes. With these properties, your tenant pays you in order to reside within your property. In the United States, a residential lease typically lasts around 12 months, but the length of the agreement must be agreed upon between you and your tenant and included in your lease agreement.
Multi-Family Residential Property
As the name implies, a multi-family residential property is one in which multiple tenants or families reside. This type of property is generally considered to be the most stable of the different types of properties because the loss of one tenant will only have a small impact on your bottom line.
Mixed-Use Real Estate
Mixed-use real estate is property that combines a variety of different categories of real estate, such as residential and commercial space. Mixed-use real estate offers built-in diversification, which can help to reduce the overall risk of the investment.