If you’re new to the real estate investment market, it’s important to know that there are two main types of investment: residential and commercial real estate investments. Commercial real estate is further divided into four main types of properties. There are advantages and disadvantages to each type of property. The four types are:
• Offices. The first thing that comes to mind when many people think of commercial real estate investments is office buildings. Office properties come in many varieties, from major downtown offices to suburban office parks. Typically housing white-collar workers, income from office buildings comes from a company paying rent. Office properties tend to be fairly responsive to the economy, and your returns may vary accordingly.
• Multi-family residential. These types of properties include apartment buildings, duplexes and condos. Multi-family residential properties are typically a more stable investment, since people always need a home regardless of economic conditions. However, you may find yourself paying for more building upkeep and spending more time managing the property.
• Industrial. Because they usually require less management, industrial properties can be a good choice for first-time real estate investments. Industrial properties include warehouses, factories and distribution centers. Additionally, industrial properties tend to be cheaper than other types of commercial real estate.
• Retail. Retail properties share many things in common with offices, since the income for both is based on rent. Retail properties come in two types: single storefronts and retail centers. Retail centers offer many stores and typically include one or more large anchor stores, such as a grocery store or a home improvement store. Success in retail property investment is driven by many factors, such as location and visibility. The quality of the stores is also incredibly important.
If you’re unsure where to begin when it comes to purchasing commercial real estate, knowing the difference between the four main types of investments is a great place to start. From there, you can consider how involved you want to be with your property. If you’re looking to be highly involved, an apartment building might be a good choice. If you’d rather be hands-off, look for industrial properties like warehouses.
