Types of Real Estate Investments
If you are thinking investing into property or you are currently owning, flipping or developing sides of the business, it is time to learn about different types of real estate investments.
Residential real estate
Residential properties are those that are suitable for people to live in, like apartment buildings, houses, villas, town houses. If you are investing in residential real estate that means that you will rent the place. How long you will be renting the place depends on the rental agreements. They are done using a company or signing it with an owner directly and it is called lease agreement. It can be as short or long period one; more stable is the long period agreement which in United States lasts for twelve months.
Commercial Real Estate
Commercial properties are office buildings. You could build your own and rent it to business owners. The two most important rules for these properties are-location and parking. That means that you need to own land first, the price of which depends on the area where it is located. There are special business districts for that or the prestigious city center area. It is not common to have multi year leases with commercial properties. Because it is safer for the owner torent for couple years because market changes, rent rates may increase and the owner could have possibility to earn more from the property and not to be locked into the old agreements.
Retail real estate
These properties are malls, shops, boutiques, retail store fronts. There are cases when landlord receives a percentage from a sale generated at his property. It is additional earnings without rent, because they are trying to keep the locale the best looking and functional as possible to attract more sales.
Industrial real estate
It is everything from warehouses, logistics centers to car wash places and other properties that generates income from various purposes buildings. These types of investments always require large sums of money and service revenue streams, like adding additional equipment at a car wash to increase the return of investment.
Mixed use real estate
These kinds of properties combine categories mentioned above into one project. It can even be the whole city. There is an example in California when an investor for couple millions of dollars found a mid-size town in Midwest. He built 3 story building with different use premises and surrounded it with retails shops. The bank who gave him a loan, leased a ground floor in the building. That generated significant amount of income. These investments are good for those who have a lot of assets because they have a degree of built in diversification.
But if you do not want to deal with properties yourself, there are REITs (real estate investment strusts). Where you invest through them, they buy shares of a company which owns properties and distributes all income as dividends. Different kind of REITs exists now, i.e. if you would like to own in hotel you can invest in the trust which deals just with hotels.