Real estate refers to land and the improvements, like buildings, on it. It also includes rights to enjoy natural resources like bodies of water, timber or minerals.
Investment property can yield profits through appreciation and rental income. Furthermore, profits may arise from the development of the property itself.
Residential
Residential real estate refers to any land and buildings used primarily for living purposes, as opposed to commercial or industrial real estate which primarily serves business needs.
Residential property includes single-family homes, townhouses, condominiums and multi-family apartment buildings. Investors can buy these properties as rentals or flip them for a profit.
Residential real estate investing can be an excellent way to build equity in your home and make money. However, appreciation is not always guaranteed so it’s essential that you understand the risks before making a final decision.
Residential real estate is far larger than commercial real estate, and tends to do better during economic downturns since more people are searching for housing than businesses looking to lease space.
Commercial
Commercial real estate refers to any property used primarily for business purposes rather than private living quarters. Examples of this include office buildings, shopping centers and warehouses.
Residential real estate, which can be bought and sold with little financial risk, requires more sophistication and larger amounts of money from investors. On the positive side, commercial real estate often provides high returns with consistent monthly cash flows–especially during times of market shocks.
Commercial buildings typically lease their space to a tenant who pays the owner monthly rent for use of the space. These leases can range from one year up to ten years in duration.
Industrial
Industrial real estate refers to properties used by businesses for manufacturing, storing and distributing products. This could include warehouses, garages, distribution centers or docking bays.
Industrial buildings have seen low vacancy rates throughout the commercial cycle and the industry has seen strong growth. Furthermore, tenants in this sector tend to have longer lease terms with regular escalations.
Class A industrial assets are usually the newest structures in a given market and boast high-quality building materials, cutting-edge mechanical and utility systems, as well as excellent tenant tenancies. These buildings can be ideal for investors who wish to preserve capital while earning passive income through rent escalations.
Industrial land is an undervalued real estate investment opportunity that offers investors the chance to build from the ground up. Furthermore, industrial properties tend to have lower long-term vacancy rates due to their inherent turnover within the building itself.
Land
Land is an essential aspect of any real estate project, whether residential or commercial. Not only does it contribute to the cost, but it also serves as the basis for development, growth and revenue generation.
Nature has bestowed all kinds of physical elements upon an area or piece of property; such as fields, forests, minerals, climate changes, animals and bodies or sources of water. These factors collectively form what is commonly referred to as “environment”.
Lenders often prefer land as collateral due to its age and inherent invulnerability to transportation, theft and destruction.
Landowners have the freedom to utilize their property for various activities, such as hunting, grazing, farming and building houses. However, if this use does not comply with local zoning laws they could face legal repercussions. Furthermore, due to fierce competition for land and rising market values, timing is essential when investing in property.