When investing in real estate, it may seem pretty straightforward to those with little to no knowledge. After all, you just buy property and watch it appreciate in value, right? There are a ton of different real estate investment types. Here are some of the most important that you need to be aware of.
Residential
This is perhaps the most common form of real estate investment. This covers apartment buildings, houses, townhouses, and vacation houses. Generally speaking, a person either pays you for the property or to live on the property.
Length of stay is dictated through a lease or rental agreement, though the most common length is about 12 months.
Commercial
This is the second most common form of real estate investment. Commercial properties typically entail office buildings. Depending on the size of the commercial space, you may be able to lease out the space to one or more companies or small business owners, who would then pay you rent in exchange for use of the property.
Commercial real estate can feature multi-year leases for tenants. That makes for a stable cash flow, though the markets do fluctuate.
Industrial
When it comes to industrial real estate, this covers storage units, warehouses, car washes, and any other kind of special purpose real estate where sales are generated through customers who use the facility.
There are also potentially significant fees and other service revenue streams, such as coin-operated machines in a car wash. That leads to a potentially lucrative extra stream of income for the owner.
Retail
Retail properties cover your strip malls, shopping malls, and any other kind of retail storefront. In some instances, the property owner may get a percentage of any sales generated by the business on top of the base rent. That gives the property owner the incentive to keep the property in the best possible condition for the tenant.
These are the major real estate investment categories and each offers its own unique set of benefits and downsides. Knowing which avenue is best for you is as good a place to start as any.