If you are an investing newbie and are thinking of investing in Belmont rental real estate, you may have noticed that there are several options out there. Rental property investors, in particular, have a number of choices when it comes to property type, size, and function. If you’re not sure which type of rental property is right for you, start by understanding the four main types of real estate and the reason for each one. Then restrict your options until you recognize the style of rental real estate that fits your needs and goals.
Residential
Most new real estate investors considering a purchase want a residential rental property. Of course, there may be a good reason for this: the residential real estate market is huge! In 2020, it was valued at $33.6 trillion and still growing. By definition, residential real estate is bought and occupied as a dwelling by owners or tenants.
Within this broad category of real estate, there are many different kinds of residential properties: townhomes, duplexes, multi-family buildings, single-family residences, and others. Thanks to lifestyle and renter demographic changes, single-family rental properties have been in high demand for quite some time. This makes investing in single-family properties one of the most popular options for new investors.
Commercial
Another type of real estate is commercial real estate. This type of property is used only as a workspace or to conduct a business or trade. Just like residential properties, there are many kinds of commercial properties. Office space, retailers, restaurants, hotels and resorts, and even healthcare facilities all fall under the category of commercial real estate.
There are many benefits of investing in commercial real estate, as it can be really profitable for some investors. The issue, however, is with the purchase price. Commercial properties tend to have more expensive initial costs than residential properties. This can be more than enough to dissuade many new investors.
Industrial
Although technically part of the commercial real estate category, industrial real estate is quite unique, as it is often designated to be used in very specific ways. Examples of industrial real estate include car manufacturers, storage and distribution centers, food processing centers, power plants, and research and development parks.
There are also three different classes of industrial real estate – A, B, and C – so it’s vital to do your research if you are thinking about investing. Leases on industrial properties can generate quite a lot of profit and also tend to be very long-term holdings. And, like commercial real estate, it can be very expensive to buy industrial property, particularly if such properties are in high demand.
Land
The fourth and final type of investment property you should be familiar with is land investment. In most circumstances, raw or vacant land is purchased with the purpose to develop it in some way or using the natural resources on or under the land for profit.
For most investors who own land, this would include entering into lease contracts that allow tenants to harvest minerals or water, oil or mining, timberland, orchards, or to use as farms, ranches, and recreational activities. Buying raw land, in particular, is a highly speculative investment that carries an equally high degree of risk. But in the right circumstances, leasing land can be very profitable for a real estate investor.
With so many different choices one can make, most real estate investors will specialize in one type or sub-category of real estate. This can be particularly effective when you are just starting since it takes time to learn everything you need to know about investing in each type of real estate.
If you want to begin investing in residential rental properties, we can help! Our local Belmont property management experts work with investors like you to help find, prep and lease quality residential rental homes. Contact us today to learn more.
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