Before you rush in and invest your new-found wealth in real estate, it is paramount that you know about the various types of investments available in the real estate industry. With knowledge and patience, you can use any of the types to generate a passive income and contribute to your finances. Without ado, let’s find out about each type in brief.
Various types of real estate investments
Residential real estate: You can buy residential properties like vacation homes, townhouses, apartments and even individual houses to rent out. Individuals or families that rent the property will pay you to rent based on a rental agreement signed by both parties involved. The agreement can contain all the terms and conditions with any special clauses that you deem necessary. This is by far the safest, simplest and most common form of investment in real estate that people indulge in.
Commercial real estate: Here you invest in properties like office buildings and skyscrapers that are used for commercial purposes. You can also construct your own building with multiple offices and rent it out on lease; typically, commercial leases run for several years at a stretch. In such investments, the returns are higher than on residential properties. What is noteworthy in these investments is that when the market is down you will not be affected because of the already drawn lease terms and you will be saved; but the contrary is also true that when rentals high you are locked with the old agreements and you won’t be able to benefit from the change in rates. Despite that, you can earn more profit on these properties than on residential properties.
Industrial real estate: Land and property that is used for warehouses, manufacturing units, as distribution centers, and even car wash come under this category. E-commerce becoming popular there is an increasing need for distributing goods as fast as possible to the customers necessitating the need for warehouses. Industrial real estate is very lucrative because it is easier to procure and operate industrial real estate at a cheaper rate than residential or other commercial real estate properties and the cash flow is steady as the leases are longer.
Retail real estate: Storefronts, strip malls and shopping malls are grouped under this heading. Owners can also stake claim to a percentage of the sales from these outlets. But currently, this sector is losing its sheen and people are turning towards a mixed real estate where on the same property you have malls, storefronts, offices, gyms, and cinemas. The idea is to attract the millennials and ensure that there is something for everyone in the family.
Before you finalize the type of real estate you would want to invest in you must understand the legal side of the business also. Do not enter into any kind of investment without proper consultation with an attorney well versed in real estate rules and regulations and a financial advisor. Sometimes things will not go as planned; the advice of these experts will prepare you for such eventualities and be able to bail you out.