If you are new to investing in Brentwood rental real estate, you may have noticed that there are enough options out there. Rental property investors, in particular, have lots of options when it comes to property type, size, and function. If you are not sure which type of rental property is right for you, start by getting to know the four main types of real estate and the purpose of each one. Then narrow down your options until you find the type of rental real estate that best caters to your needs and goals.
Residential
Most new real estate investors anticipating a purchase pick a residential rental property. Of course, there may be a good reason for this choice: the residential real estate market is enormous! In 2020, it was valued at $33.6 trillion and still growing. As the name suggests, residential real estate is purchased and occupied as a dwelling by owners or tenants.
Within this huge category of real estate, there are many different types of residential properties: townhomes, duplexes, multi-family buildings, single-family residences, and more. Thanks largely to lifestyle and renter demographic shifts, single-family rental properties have been in high demand for years. This makes investing in single-family properties one of the most popular options for new investors.
Commercial
In contrast, we have commercial real estate, which is a property used only as a workspace or to conduct a business or trade. Similar to residential properties, there are also several different kinds of commercial properties. Office space, retailers, restaurants, hotels and resorts, and even healthcare facilities all fall under the category of commercial real estate.
There are many benefits of investing in commercial real estate, as it can be a very lucrative option for some investors. One disadvantage, however, is the initial expense of commercial properties. These types of properties tend to cost a lot more than residential properties. This can prove to be a hurdle for many first-time investors.
Industrial
Even though it’s technically part of the commercial real estate category, industrial real estate is a kind of real estate that is designated to be used in 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 do your research before you decide to invest. Leases on industrial properties can make you a lot of profit and tend to be very long-term holdings. And, similar to commercial real estate, it can be expensive to purchase industrial property, especially if such properties are in high demand.
Land
The fourth and final type of investment property you must know about is land investment. In most cases, raw or vacant land is purchased with the intention to develop it in some way or to use the natural resources on or under the land for profit.
For most investors who own land, this would include getting into lease agreements that allow tenants to harvest minerals or water, oil or mining, timberland, orchards, or to use as farms, ranches, and recreational activities. Purchasing raw land, in particular, is a speculative investment that carries with it an enormous amount of risk. But in the right circumstances, leasing land can be very lucrative for a real estate investor.
With so many different choices available, most real estate investors will specialize in one type or sub-category of real estate. This can be especially effective when you are just starting since it takes time to learn everything you need to know about investing in each type of real estate.
If you are willing to start investing in residential rental properties, we can help! Our local Brentwood property management experts work with investors like you to help find, prep, and lease quality residential rental homes. Contact us today to learn more.
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