Understanding the 3 Types of Real Estate
There are three main types of real property, residential, industrial, and commercial. These categories of properties differ in size, price, and amenities, and they all serve specific purposes. It’s important to understand these differences to make informed real estate decisions.
Commercial
Commercial real estate is a category of real estate that provides an investment opportunity. It includes retail, office space, hotels, and industrial properties. Investing in commercial property offers the potential for capital appreciation and rental income.
If you are interested in real estate investments, you need to understand what commercial real estate is and how it differs from residential real estate. Some key factors to consider when evaluating commercial property include location, tenant needs, and the local market.
There are four primary commercial real estate leases, each with a unique level of responsibility for the landlord. Some leases last only one year, while others last up to 10 years.
Some of the most lucrative commercial properties are in dense urban areas. The average return on investment for retail is around 6%, while industrial properties are the most volatile.
Multifamily buildings and complexes, including apartment buildings, are considered secure investments. The owner earns income through rent and property taxes.
Office and industrial properties are generally used for manufacturing and distribution. Industrial buildings have lower overhead costs than office towers. Generally, they rent at a lower rate.
Mixed-use properties are a combination of commercial and residential properties. Common examples of mixed-use properties include apartment buildings with retail spaces on the ground floor.
Residential
Residential property is a fancy term for land or buildings dedicated to living in. They range from single-family homes to multi-story dwellings with shared walls. One of the perks of being a landlord is renting out space, which is a great way to generate extra cash. A plethora of rules and regulations protect tenants.
This is a good thing, especially in a hot real estate market. This is also why it is important to consider buying in a high-growth area. The housing industry is a longstanding staple of the national economy, so you can count on it being in demand for many years. You can expect a decent price for your investment. The right tenant can increase your property value, while a slapdash landlord can detract from your equity. A reputable real estate agent can help.
A savvy homeowner will find out they must put down a smaller percentage of the home’s value to secure a mortgage. Using this method is not for the faint of heart. However, if you can afford to pay more than a couple hundred dollars monthly, you can buy a dream home in no time. To ensure you are not overpaying, be wary of any agent who tells you they’ll give you a hefty discount.
Industrial
The e-commerce boom has created a demand for industrial real estate. Warehouses are important for distributing goods and supporting e-commerce companies. E-commerce will require 70,000 square feet of industrial space by 2025.
Industrial property is a great investment. It is a secure and stable asset that pays for itself over time. It offers an interesting exit strategy that other real estate types don’t.
A major reason for this is the ability to reduce costs while maximizing net operating income. Typically, industrial properties are constructed with concrete floors and ceilings and designed to operate and maintain easily.
This helps ensure that an industrial property retains its value over time. It can also mean a lower cost of repairs. A properly constructed building can attract new tenants with little or no interior build-out.
Industrial properties are often located in high-demand areas close to key transportation hubs, such as airports, highways, and rail junctions. These locations are ideal for businesses that need to move products quickly.
In addition to a robust economy, e-commerce will also drive a need for more warehouse space. E-commerce will increase demand for warehousing by driving retailers to compete for customers with same-day delivery.
In the past, the industrial real estate market was considered a niche asset class. However, this has changed over the years. Now, it is one of the hottest real estate categories in the country.