Real estate is among the oldest and most popular forms of investment. Everyone knows how valuable land property is, but not everyone knows its full potential and many different kinds. As you learn more about the different types of real estate investment, you will soon discover which one is best for you and which one you can manage.
Each type of real estate property comes with its own benefits and disadvantages, different forms of paperwork, and quirks in revenue cycles and lending styles. It’s best to familiarize yourself with each to truly understand what you’re getting into. But before diving into the nitty-gritty of each type of real estate, here’s a quick overview to get you started.
Common Types of Real Estate Investment
If you’re set on acquiring, owning, and selling real estate, knowing what makes each real estate category unique will be important. Knowing the different types will help you find out what you can manage best, as they all come with differences that require different skills and networks.
Single Residential Houses
One of the most common and straightforward forms of real estate investments is a single-family house. It’s as simple as purchasing a single house and renting it out. These investments tend to appreciate faster depending on the location, and relatively safe single units tend to bounce back from economic effects relatively quickly. There’s also less maintenance involved. It normally has only one of each utility (furnace, water, electricity, etc..) compared to an apartment property where you will need a property manager to handle things. You are also most likely to receive better tenants as single-family house renters tend to stay longer and maintain their new home better.
A multifamily property is a type of residential property that has two or more units. They can be townhouses, duplexes, or an apartment complex. You would have multiple tenants in one location, making maintenance relatively easy. These property types are great when it comes to passive income, as you will be generating revenue from multiple incomes from a single source. You will also have to deal with fewer loans as multifamily lenders are easily accessible, removing the hassle of juggling multiple loans for multiple properties. While you may need a property manager to keep things smooth and up to code, it’s a relatively ‘safe investment’ as everyone will need a house, regardless of the economic climate. It stays in demand throughout economic upturns or recessions.
With many tech startups and companies popping left and right, commercial properties are also a good investment to take advantage of the continuous technology boom. Commercial property basically consists of an office building, normally in skyscrapers or, if you have the funds for it, a small building with offices. They have higher revenue potential than residential properties, and it substantially increases depending on the property’s location. You will need professional help, however, as there are many licenses necessary. Maintenance issues of commercial properties are best left to licensed professionals, as regulatory codes involving such properties are pretty strict.
We see retail properties all the time, and yet we’re not very aware of their potential. Retail properties are often found in populated areas that see a lot of foot traffic, such as malls, near parks and stations, and other ‘busy areas.’ They have a reasonable property price to rental revenue ratio, and there’s little maintenance involved as the tenants (most often shopkeepers) will be the ones doing most of the work. However, location is the secret to a successful retail property investment as potential tenants are more likely to stay with you longer if they receive more clients from that location.
With these ideas in mind, you can make a well-informed decision when finally investing in properties.