There are 3 main types of real estate investing; Commercial real estate, Residential real estate, and Earth. Each type has several subcategories.
Commercial real estate
- Several families
Residential real estate
- Single-family rental property
- Article 8 Rentals
- Holiday rents
- Small Multi Family
- Repair and return
Land real estate
- Land for commercial development
- Land for residential development
- Land for agriculture
- Land for mining
Investing in real estate is like dating someone: there are more options than time and money to pursue. Stay in your league and you will likely end up with a stable, predictable, and productive outcome. Get distracted by the flash and you may find yourself penniless and lonely.
Definition of commercial real estate investment:
Commercial real estate is a broad term used to describe the ownership of buildings used to conduct business or generate cash flow, or the acquisition of land for a long-term return on investment.
- It may be a building purchased for the purpose of carrying on its own activity.
- It could be a building that an investor purchases to generate rental income from someone else’s use.
- It may be a plot of land acquired to develop the above.
Below is a more in-depth dive into the types and subtypes of commercial real estate investing, along with a brief description of the associated risks and rewards.
Retail trade – Business investment categories
|Regional shopping center||Major shopping center development||national
Regional and local tenants
|190k – 400k square feet||REIT||Online shopping|
|Community Center||Developments that include a Walmart or similar, usually have 3 main boxes||national
190k square feet
|Demographic and Online Shifts|
|Band Center||Typical neighborhood center housing an ups, a hairdressing salon, a restaurant etc.||Local, mom and dad, franchise operators||2000-
15,000 square feet
|Road construction, Demographic changes,|
|Autonomous||Gas station, bank or large single box||National tenants, local brands||1500 –
25,000 square feet
|Private investors, Funds||Rental income dependent on the state of health of a single tenant|
Office – Commercial investment categories
- Class A – Very high end trim levels, usually in the technological and financial areas of a city. Rents are higher than the neighborhood average because these buildings have an element of prestige linked to occupancy.
- Class B – Most common level of finish in good and stable areas. Have the highest level of demand in most markets. Class A properties are not considered to compete with class B properties.
- Class C – Projects that are generally located in older areas of the city. Buildings have become obsolete both in form and in function. Rents are below the market rate and tenants can be difficult to find and retain.
- Doctor’s office is also a specialized subcategory. This is a space specially designed for tenants in the medical field and is often part of a development that attracts a variety of healthcare professionals.
- Heavy manufacturing: These facilities are designed for major product production and must be equipped with industrial size tools such as cranes, specialized welding equipment, chemical processing and painting areas. They are highly customized for the needs of individual users.
- Light assembly: These facilities do not manufacture components, but assemble and package them for shipping / storage. The zoning process for these is generally less restrictive than for heavy industry and can be found in a larger area of ââa city.
- Deposit: These projects are generally located near the main transport corridors and are designed for the storage of products. They include shipping documents for access to semi-trailers, have high ceilings, concrete floors, and consist mostly of open spaces. They can include refrigeration for cold storage.
- Industrial Flex: This product is as described. It usually offers a combination of warehouse style space with an office facade. It is generally smaller – 1,500 to 6,000 square feet; 20 ‘roll-up doors in the rear and 8’ drop ceilings in the front are typical features.
- High-rise building: A building generally made up of more than 9 floors. Built exclusively in large metropolitan areas.
- Mid-rise waist: A multi-storey building generally 5 to 9 storeys accessible by elevator. These projects are high density and normally built in urban areas.
- Garden style: These are ordinary apartment style projects found in suburban and urban areas. Usually do not exceed 3 storeys and are built with green belt areas in the center of the complex.
- Rise: These buildings are mostly smaller and have fewer amenities than garden style projects. They are usually 1 to 2 floors with stairs leading to the top floor. 4plex concepts are often referred to as walk-ups.
- Prefabricated Housing Community: Also called mobile home communities. Residents of these projects typically rent out either just the space or both the space and the prefabricated house.
- Housing for specific use / project: A wide variety of housing for families and individuals including: student, government subsidized, retirement, recovery and special needs.
Residential Real Estate Investment
- Single-family rentals: This could be a condominium, a townhouse, or a typical single-family home. Single-family rental homes are the most common form of real estate investment. They can be either self-managed or professionally managed by a property management company. The lease term is generally a minimum of 12 months.
- Article 8 Rentals: These properties are typical of single family rentals with one exception. The landlord specifically requested and received a special designation as an approved Section 8 home. Tenants have little or no income and the government pays all or part of the monthly rent. It can be a form of guaranteed income, but it can also come with its own set of challenges.
- Holiday rents: Can be any single family home, but is fully furnished and is available for short term rentals. These types of projects work best in highly desirable areas like beaches, lakes, or major entertainment districts. Most often, these units require professional property management companies.
- Small Multi Family: These properties are also referred to as small apartments or complexes with no lift; they are configured in duplex, 3 plex or quad. These units often offer a high capitalization rate and yield if properly managed. However, this type of product is often found in older and less desirable areas, where tenant issues are more common. Monthly leases are common, so the turnover is higher than with a single-family home
- Correct and return: The subject of a million TV series that make this form of investing rewarding, simple and profitable. The concept is simple, but the reality is much more complicated. You just need to buy a property at its true value, add value through improvements and repairs, and sell the property for a profit within a short period of time. The risks are unexpected repair costs, a poor understanding of post-rehabilitation value, or a rapid and unexpected change in the overall health of the market.
Land real estate investment
- Land for commercial development: Land which is acquired for the purpose of developing a shopping center. This usually involves working with architects to design plans and local governments to make sure the proper zoning is in place.
- Land for residential development: Very similar to commercial process, but with a residential end user in mind. Residential development is common in infill areas or made possible by the conversion and rezoning of large tracts of farmland or other undeveloped land.
- Land to cultivate: Buying farmland is often a great way to buy large tracts of land while still earning income, such as rent from the farmer’s land and huge government tax breaks based on farm use. . It is common for developers to buy farmland, lease it to the farmer until he receives the zoning approvals he needs to move the project forward, or until the market returns the development. financially viable.
- Land for mining: Leasing the mineral rights to a property can provide exceptional long-term cash flow depending on the nature of the minerals available. This is often a great multigenerational game, one that allows for cash flow, appreciation, and when minerals run out, development.
Each type of real estate investment has its own advantages and challenges. Success and access depend heavily on the skill level, experience and financial resources of the investor. Either way, a successful investment requires a team. It takes a great lending strategy, agent representation, property management, and a short and long term strategy. As a new investor, your main goal should be to find a team and start with something that is well within your price range and comfort level.
John Crow was appointed CEO of Centurion Investments in 2010. In his current role, John heads a series of real estate-related companies. Century 21 Northwest, a full-service real estate company, The Location Pro, a commercial real estate sales and investment division, and Century 21 Property Management, a residential rental management division.