When most people hear the world real estate, the vision of a professionally dressed realtor showing you around houses often comes to mind. While houses make up a vast majority of the real estate industry, there are various types of property that exist. Often, you won’t come across other varieties of real estate unless you are venturing into the investment side of the industry. Those who choose to invest have a wide range of properties to choose from. Understanding the difference between the types real estate and their respective benefits is crucial in making a sound investment decision.
Residential
As previously mentioned, places, where people choose to live, are the most common form of real estate. Investors in residential property rely on their tenants as their source of income. Most often, those who invest in residential properties choose single family homes or apartment complex’s to put their money towards. Seasoned investors believe residential investments are one of the safer bets when it comes to investments. The reason behind the security of a residential investment is due to the fact that people will always need a place to live. Another reason behind the success of residential investments is the length of the lease. Most landlords offer one-year leases with high early-termination fees. Thus turnover rates are often lower for residential investors.
Commercial
This style of real estate is most often see in the form of office buildings and large skyscrapers. For those with the financial ability to buy a large building and rent out small spaces to companies often yield high profits. When investing in a commercial property in a major metropolitan you are likely to see a great return on your investment. Commercial real estate is typically a more challenging process than residential investing because of the various tenants who will occupy the space. Creating an environment that suits the needs of multiple companies rather than those of individual families can sometimes cause conflict. In commercial real estate situations, a multi-year lease is often offered. While this locks a tenant in for a long time, it also fixes the rate of the rent, regardless of if the markets fluctuate.
Check back soon for more of Mirko Manfredi’s advice on real estate investments!