Types of Investment Properties
As a real estate investor who is looking for the perfect property to add to your portfolio, it is important to remember that there are many different types of investment properties available from which to select. By learning more about each of these types, you can better determine which types you would like to include in your investment portfolio.
Residential properties are the types of properties that most frequently come to mind when discussing real estate. Residential properties include houses, townhouses, vacation homes, and apartment buildings. In other words, any property where a person pays to live in the property is considered a residential property. Most residential leases last for twelve months, but you can choose to agree to a longer or shorter rental agreement.
If you are interested in investing in residential property, you will also need to decide between investing in single-family residences versus multi-family residences. The pros to a single-family residence include less upkeep and making a smaller upfront investment, while investment in a multi-family property means you are more likely to always have a constant stream of income even if one of your units sits empty for a period of time.
Commercial property is a property that is rented to companies and small businesses. As such, commercial properties are most frequently in the form of an office building or a skyscraper. Commercial properties frequently have multi-year leases, which can offer greater stability in terms of cash flow while also providing you with protection if rental rates decline. On the other hand, you may also be locked into a lower rate if rental costs increase over the period of the lease.
Retain properties are those that are rented by businesses that are selling goods or products, such as strip malls, shopping malls, and retail storefronts. Often, landlords of retail properties receive a percentage of the sales generated by the store in addition to the base rent.
Industrial properties include a wide range of properties used for various industrial purposes. Examples include warehouses leased to distribution centers, car washes, and other special purposes real estate. In addition to the base rental fee, these properties may generate extra income in the form of service revenue streams, such as adding coin-operated vacuum cleaners at a car wash.
Mixed Use Property
As the name implies, mixed-use property is one that may include a combination of the above property types. For example, the property may include residential space along with office and retail space. Not only does this allow you to generate multiple streams of income, but it also makes the space more attractive to renters who can easily shop, dine or even go to work within the same building where they live.
Ultimately, you may decide that the best route for you is to include a variety of different types of property in your portfolio. Knowing more about each of the property types, however, will help you to better determine where to get started with your investment journey.