When looking to invest in real estate, it’s important to consider the type of property before you buy. Location is probably the most important aspect of real estate investing, but the type of property also has a huge impact on your bottom line. Just because one type of property does well in a certain area doesn’t mean other types are doing as well. Furthermore, just because a certain type of property does well at one point doesn’t mean it will continue to be a good investment indefinitely.
Below are four examples of real estate properties you can invest in.
1. Office Properties
For many real estate investors, office properties are the cornerstone of their business. This is because office buildings usually bring in higher rents than other types of real estate. Having said that, however, during times of economic strife, office buildings can become a burden to the investors who own them because their operating costs are so high.
Because office properties tend to be located in busy, downtown or suburban industrial parks, they are in high demand. As local companies grow, their need for office space grows as well. This higher demand forces higher rental rates, which increases an investor’s bottom line.
2. Retail Properties
Investing in retail properties gives you many options. Retail investments range in size from grand, enclosed shopping malls to smaller, single-tenant stores with individual entries. Today’s retail options include more larger single-tenant stores with adjacent roadway access than shopping malls.
Retail property investment is driven by several factors including location, population density, visibility, income levels, and population growth. Retail properties anchored by a grocery store tend to be more attractive and bring in better rent payments. When investing in a retail property, it’s best to look at areas where the economy is growing, and retail sales are high.
3. Industrial Properties
If you’re looking for a less-intensive investment, consider an industrial property. These properties require a smaller investment and management commitment and have lower operating costs. Industrial properties include warehouses, manufacturing, distribution, and research and development.
When considering an industrial property, it’s important to look at its location (is it close to public transport?), functionality (how high are the ceilings?), and its specialization (does it have equipment that makes it better suited for certain types of business?)
4. Residential Properties (Multi-Family)
For the most stable real estate investment, multi-family residential properties are best. This is because no matter how the economy is doing, people still need a place to live. Further, should one tenant move out, the negative effect isn’t as drastic as if a tenant leaves one of the other types of properties mentioned above.
One downside of owning a residential rental property is the fact that most operating costs are the landlord’s responsibility, whereas these costs can be passed to the renters of commercial property leases.
A big plus to owning residential rental property, however, is the fact that government-insured financing is an option. For just a small monthly premium, owners get a lower interest rate, which increases the return on the investment.
If you’re new to real estate investing, consider the list above to help you decide which type of real estate property best suits your intended outcome. Each type of property has its pros and cons, so be sure you know what you’re getting into before jumping in with both feet.