Residential
Some new real estate investors just starting to consider a purchase pick out a residential rental property. Certainly, there may be an appropriate reason for this: the residential real estate market is large! In 2020, it was valued at $33.6 trillion and still expanding. By definition, residential real estate is purchased and occupied as a dwelling by owners or tenants.
Within this broad category of real estate, there are numerous different kinds of residential properties: townhomes, duplexes, multi-family buildings, single-family residences, and more. Thanks to lifestyle and renter demographic changes, single-family rental properties have been in high demand for years. This makes investing in single-family properties one of the most commonly known options for new investors.
Commercial
On the flip side, commercial real estate is property used only as a workspace or to conduct a business or trade. As with residential properties, there are some different variations of commercial properties. Office space, retailers, restaurants, hotels and resorts, and even healthcare facilities all fall under the classification of commercial real estate.
There are numerous benefits of investing in commercial real estate, as it can be a very profitable option for several investors. But take note, the initial cost of a commercial property is perhaps so much higher than a residential property, which can be a tough obstacle for first-time investors to overcome.
Industrial
Conceding that it’s technically part of the commercial real estate category, industrial real estate is a really unique type of real estate usually designated for use in very specific ways. Examples of industrial real estate typically include car manufacturers, storage and distribution centers, food processing centers, power plants, and research and development parks.
There are essentially three different classes of industrial real estate – A, B, and C – so it’s advisable to do your research if you are considering investing. Leases on industrial properties can be very profitable and inclined to be very long-term holdings. And, same as commercial real estate, it can be pretty expensive to invest in industrial property, specifically if such properties are in strong demand.
Land
The fourth and final type of investment property you should understand is a land investment. In the majority of cases, raw or vacant land is purchased with the aim to develop it in a particular way or to utilize the natural resources on or under the land for profit.
For some investors who own land, this would entail offering leases that allow tenants to harvest minerals or water, oil or mining, timberland, orchards, or to use as farms, ranches, and recreational activities. Getting raw land, primarily, is a substantially speculative investment that carries an equally high degree of risk. But really, in the right circumstances, leasing land can be a very profitable project for a real estate investor.
With a bunch of different options available, some real estate investors will choose to specialize, they will first get the hang of one type or sub-category of real estate. This can be mainly beneficial when you are just getting started considering that it takes time to ascertain everything you need to understand about investing in each type of real estate.
If you are wanting and eager to start investing in residential rental properties, we can definitely help! Our local Milton property management experts support investors like you to help distinguish, prep, and lease quality residential rental homes. Contact us this day to learn more.