Welcome to the blog. Today we will discuss the four types of real estate available on the investment market. Real estate investors can choose from four properties: residential, commercial, industrial and land. So let’s take a look at each one.
1. Residential. This sector is made of single and multi-family homes. These homes can cover a wide range of types, including, duplex, triplex, fourplex, and five plex, all the way up to a multi-floor residential complex. Also classified as residential properties are condominiums, mobile homes, and townhouses. In the case of townhouses and complex homes, rules may apply to what you can and can’t do with them, so be sure to check out their details before you invest. Single-family homes are the most popular model for real estate investors as they offer the safest return regarding mortgage repayments and neutral cash flow while the property appreciates. With multifamily homes, an investor can spread the risk so if one tenant misses a repayment or a unit is vacant, the other tenants can keep up repayments.
2. Commercial. This type of property is used exclusively for retail purposes or as office space. Investors usually purchase and then rent them out to the business owner. This could be for retail stores, restaurants, or any small business or service offices such as accountants or tax offices. Commercial properties are more complex than residential real estate, as there are different conditions to be considered in the lease depending on the modifying requirements of the business that occupies the space. Also, the commercial property’s appreciation value depends on the style and success of the company that occupies it. Realizing the actual value of a commercial property is more advanced as, unlike residential value, it’s not fixed; it can fluctuate due to several business-related factors. Sometimes in commercial leases, you’ll see three to 10 years lease options, so the paperwork is a little more complicated. If you are financing commercial property, you will require a significant down payment, a minimum of 25 to a maxim of 50%, so a good credit rating is required.
3. Industrial. These properties are generally large buildings, typically used by manufacturing companies, warehouses, or any kind of distribution company. They also include factories, manufacturing buildings and data centers. These properties are expensive but can be very lucrative in the long term. As you are leasing this property for a long-term investment, sometimes 10 years or more, depending on what they are. The companies that usually rent this type of properties will be well established because they have to set up and that cost is quite expensive and as they are big, they require a lot of land and tenants can come and go depending on their success. A shrewd investor will know that the profits are quite large, but a large outlay is required in this sector.
4. Land. This can be a very risky investment, especially if it’s not producing any passive income, unless you invest in farmland that could be leased to someone that is going to be working on the land. But if you were buying the land because you think that this is going to appreciate or maybe you’re going to be selling it down the road to a developer, land investment could be very lucrative. However, finding a lucrative land bank takes a lot of research, and sometimes a little bit of intuition, as sometimes you really must get lucky with land that you feel that is going to appreciate in time. Or maybe you know that the population in an area is growing and it’s going to go that way, however it may not so you just have to be careful. But I think this land investment is something that a lot of the bigger real estate investors get into especially if you are a developer wanting to build houses.
I hope that I have provided you with an insight into the four types of real estate, if you have any questions or need any specific, more detailed information on any of these areas please feel free to contact me and I will be happy to advise. Until next time invest wisely and take care.
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