We often dive into pretty specific topics in regards to real estate investments, but if you’re new to the game, you may be curious what all there is to invest in. Needless to say, any type of real estate that you choose to invest in comes with potential benefits as well as potential risks. Let’s take a look at some of the different options that are out there.
This type of real estate includes properties such as: houses apartment buildings, townhouses, and vacation homes where someone would pay you to live at your property. The duration of their residency is dependent on the rental or lease agreement. You’ll find that the majority of residential leases are on a twelve-month basis in the U.S.
The types of properties that fall under this category are mostly office buildings and skyscrapers. An option here would be to invest in constructing small building and then dividing it up into several individual offices. You could then lease them to companies and small business owners, and then of course charge them rent to use the property.
As opposed to residential where a 12 month lease is pretty standard, you will often find multi-year leases in commercial. This is a great way to lock down a good cash flow for a good amount of time. But do consider that markets change, and rental amounts could increase considerably in a short amount of time. Though, you might not be able to raise rates if commercial property is bound by an older agreement.
Industrial real estate is comprised of a variety of properties such as: industrial warehouses, storage units, car washes, or other distinct real estate that produce sales from patrons who use the property. Industrial real estate investments can regularly have large fees and other revenue streams, like coin-operated vacuum cleaners at a car wash, which is a good way to improve return on investment for the landlord.
Another familiar category consisting of shopping malls, strip malls, and other retail shops. On some occasions, the owner of the property might receive a portion of sales generated by the renter’s store in on top of a base rent to encourage them to keep the property in excellent condition.
These types of properties are ones that combine any of the categories previously mentioned into one project. For example, an investor from Dallas appropriates several million dollars and finds a mid-size town in the Michigan. She then approaches a bank for financing and builds a mixed-use multi-story office building encircled by retail shops.
The bank that lent her the money then takes out a lease on the ground floor, which generates substantial rental income for the owner. Then the other floors are leased to a car insurance company and other companies. Next, a Corner Bakery, a gym, a Taco Bell, an upscale boutique, an auto parts store, a nail salon, etc. quickly lease the nearby shops.
So there’s your crash course on the variety of potential real estate investment opportunities. Some people stick to one kind, while others like to dabble in all of them.