If you are starting out investing in Novato rental real estate, you’ve probably realized that there are quite a lot of options out there. Rental property investors, particularly, have a wide range of choices in terms of property type, size, and function. If you’re hesitant about which type of rental property is perfect for you, start by learning about the four main types of real estate and their respective purposes. After that, filter down your options until you discover the type of rental real estate that fits your needs and goals.
Residential
Most new real estate investors considering a purchase choose a residential rental property. Of course, there may be a good reason for this: the residential real estate market is enormous! In 2020, it was valued at $33.6 trillion and still growing. By definition, residential real estate is purchased and occupied as a dwelling by owners or tenants.
Within this broad category of real estate, there are many various kinds of residential properties: townhomes, duplexes, multi-family buildings, single-family residences, and so forth. Because of lifestyle and renter demographic changes, single-family rental properties have been in high demand for years. As a result, investing in single-family properties is one of the most popular options for new investors.
Commercial
On the other hand, commercial real estate is property used only as a workspace or to conduct a business or trade. As with residential properties, there are many different sorts of commercial properties. Office space, retailers, restaurants, hotels and resorts, and even healthcare facilities all fall under the classification of commercial real estate.
There are numerous perks of investing in commercial real estate, which may be a lucrative alternative for some investors. However, the initial cost of a commercial property is likely to be significantly higher than a residential property, which can be a challenging barrier for first-time investors to manage.
Industrial
Even though technically part of the commercial real estate category, industrial real estate is a different type of real estate frequently designated for use 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 necessary to conduct your research if you are thinking about investing. Leases on industrial properties can be quite profitable and seem to be very long-term holdings. In addition, the same as commercial real estate, it may be quite costly to acquire industrial property, particularly if such properties are in great demand.
Land
The fourth and final type of investment property you must learn about is a land investment. In many situations, raw or vacant land is purchased with the intention to develop it in some form or to use the natural resources on or under the land for profit.
For most investors who own land, this would incorporate offering leases that allow tenants to harvest minerals or water, oil or mining, timberland, orchards, or to use as farms, ranches, and recreational activities. Acquiring raw land, mainly, is a highly speculative investment that carries an equally high degree of risk. However, in the right conditions, leasing land can be a valuable investment for a real estate investor.
Because there are so many alternatives, most real estate investors will concentrate on one type or sub-category of real estate. This can be highly helpful when you are just getting started since it takes time to learn what you need to know about investing in each type of real estate.
We can assist you if you are ready to begin investing in residential rental properties! Our local Novato property management experts engage with investors like you to help discover, prep and lease quality residential rental homes. Contact us today to discover more.
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