Types of Real Estate Investments

Residential Real EstateCommercial Real EstateIndustrial Real EstateAgricultural Real EstateRaw Land InvestingMixed-Use Real Estate

Real estate is one of the oldest forms of investment. At its core, real estate investing is the acquisition of a property for the purposes of securing wealth and financial gain. Not all types of real estate investments are ideal for everyone, however. Keep reading for a short list of the general types of real estate properties and a quick summary of each to help you decide which investment is right for you.

Main Types of Real Estate Properties Explained

Residential Real Estate

Residential Real Estate

Residential real estate is real estate that is intended for residence. This can be a single-family home, multi-unit residences, townhouses, or even mobile homes.

Investing in each property is slightly different, each requiring different management and upfront costs. As a general rule, multi-unit residences and apartment buildings require more substantial upfront costs than purchasing a condo or townhouse.

Residential real estate is the most traditional route of investment, and is generally the first step of investors entering the real estate investment world. Many people will also “flip” homes for sale – that is, purchase a run-down property, repair it, and sell it at a profit.

Commercial Real Estate

Commercial Real Estate

Commercial real estate is real estate that it intended for commercial use, such as restaurants, retail stores, small businesses, or office space.

In general, this type of investment requires a significant down payment (between 25-50%), and oftentimes banks will require a lined up lease agreement before approving a mortgage. Although it may take more capital and more research to invest in such a property, commercial real estate oftentimes has longer-term leases than residential real estate. This low turnover rate allows investors to net higher and steadier yields without having to deal with frequent vacancies.
Industrial Real Estate

Industrial Real Estate

Industrial real estate refers to properties such as warehouses and manufacturing plants.

This is a more complex type of investment, and is usually better suited for more experienced investors with diverse portfolios. The upfront costs of these investments are much higher than residential or even commercial real estate, and investors will oftentimes need to tailor solutions and be willing to adapt to a tenant’s specific needs. The returns on these types of investments are generally higher than residential or commercial real estate investments, and usually come with the added perk of long-term leases.

Agricultural Real Estate

Agricultural Real Estate

Agricultural real estate is land that is used to raise livestock or produce crops. This type of real estate includes farms, ranches, timberland, and orchards.

Agricultural real estate provides many options for investors in terms of structuring the yields of their investment, as it allows the option of investing in the agricultural business that occupies the land. It also offers a great opportunity for a more diverse portfolio that is less subject to the ups and downs of more traditional real estate investments.
Raw Land Investing

Raw Land Investing

Raw land investing is investing in land that can be developed in the future.

This type of investment requires extensive research into the development in the area, and it can require additional investment to develop the land if this is the route you choose to take. You can also purchase raw land in an area with high projected growth, and then sell it to a developer in the future. However, new developments take time and bureaucracy, and investors risk holding onto and paying taxes on a piece of land that does not provide a steady monthly yield for a (sometimes lengthy) period of time.

Mixed-Use Real Estate

Mixed-Use Real Estate

Mixed use real estate is a property with a combination of uses, such as a residential complex with commercial space.

These types of investments are inherently diverse in nature, as they offer the option of investing in more than one category of real estate at once. They offer the tenants the benefit of close proximity to amenities, and offer the businesses more direct exposure to a potential customer base. There is extremely high demand for successful mixed-use residences, landlords are often able to charge higher rent than in standard residential properties in the same area.