Different Types of Real Estate Investments
Different types of real estate offer investors several options to invest from. Investing in real estate offers captivating benefits like asset diversification and passive income. However, it is essential to learn about each of the investment type before investing.
Commercial & Residential
These are the two main types of real estate investments.
In our previous blog post, we covered in detail the pros and cons of investing in each of commercial and residential physical property.
Industrial physical property is a sub-category of commercial real estate investment.
Industrial property is concerned with manufacturing-related activities. Think warehouses, storage units, factories, etc.
This type of real estate investment requires a thorough understanding of the location of desired investment, whether it’s industrial or residential, as well as the economic status of the market (if it is growing or facing a downturn).
Retail physical property is a sub-category of commercial investment as well.
This type of investment relies on the customers to generate revenue. Think restaurants, shops, malls, etc.
Short-Term Vacation Rentals
Who doesn’t like a short term vacation in a cozy house? Apps like Airbnb offers a platform for people to rent short-term vacation properties.
You might want to treat your property like a business while it remains its residential vibe. If your property is located in a strategic area or has this getaway vibe, it can be suitable for short-term vacation rentals.
While you won’t be concerned with nonpaying stubborn tenants, you would have to gather information about vacancy rates, management fees including cleaning costs, and seasonal rates. If you draw a precise business model, the approach will be more effective rather than treating it as a passive income.
REITs: Real Estate Investment Trusts
Real estate investment trusts are a type of non-physical real investment. REITs are basically companies that own real estate, such as malls and hotels, where you can invest in these shares on a stock exchange. In return, shareholders get to receive dividends from REITs’ taxable income on an annual basis.
This type has a lower financial barrier to entry than traditional physical real investment. Accordingly, it surely won’t have the high return of physical real estate. It is less of a headache to enter for someone who doesn’t want to deal of properties themselves.
Will you buy it and develop it yourself? This is the right investment for an investor who has a vision of developing property that he best sees profitable.
However, as much as this type sounds compelling to the creative business minds out there, it requires a great deal of market research: knowledge in building regulations, an understanding of the local real estate market, as well as a large amount of capital.
Each type of real estate investment is unique and has its own advantages and disadvantages. Each one of them is profitable in its own way, meaning each type generates ROI (return on investment) through a specific funnel – otherwise, it wouldn’t be categorized as a type of investment! The secret is knowing the key of each type.
It is up to the investor to assess what they want in a property, and how much time and money they are willing to invest. A real estate consultant draws the big picture when helping the investor brainstorm and decide on an investment. Contact a real estate consultant from Esrar that would give you all the knowledge that you need in real estate.