Investment Real Estate
Whether you are a new or experienced investor, the fundamentals are most important. Income, expenses, location, and building condition all play their role. If you are a new investor, dig up information and educated yourself. And be sure you are ready to act when a reasonable opportunity comes up. You don’t want to be in the same position 5 years from now.
If you are experienced, you have an idea of what you like. But, as we age our priorities change. And as a result our investment strategies change, too. Experienced investors should remain on the hunt for the current market’s best opportunities, and new investments that suit your latest priorities.
Investment properties come in a wide variety of categories, each with their own unique characteristics. Please explore the three major types of investment properties below.
Residential Investment Properties
Residential investments have the lowest barrier to entry, and are typically the easiest for investors to understand. Investors are able to rely on their experience with their own living arrangements to better understand the investment.
Residential investments are broken down by the number of units at the property. For example, a single family home would be one unit. A duplex would be two units. And an apartment building could be 50 units. The variables of each investment are changed depending on the number of units.
When reading the chart above, there’s a few considerations to make. First, it is apparent why single family residential properties are the most common investment type. With the highest rental rates, best tenant stability, and overall simplest acquisition and management, these properties are very appealing. However, each property type has its strength. Five units and larger buildings are fantastic investments for individuals with enough capital. These property types allow for small rental rate increases to add up to considerable sums. They also present the opportunity for management and maintenance staffs, freeing up time and attention that may be required by smaller properties.
Commercial Investment Properties
Like Residential investments, Commercial investments can be split into various categories. Commercial investments are differentiated by the type of property. These types are Retail, Office Space, and Industrial.
Retail space comes in many forms including single tenant, multi-tenant, strip centers, and more. Office space is also single or multi-tenant. Industrial space is divided into subsets that serve very different purposes. Industrial investments include flex spaces that can house an entire company, warehouses, or manufacturing space that may house heavy machinery. Commercial investments can be complicated. It is recommended to seek the help of a Realtor when making a commercial investment.
No matter the type of commercial investment, there are a few important considerations to make. First, location. Is the business that will occupy the space dependent on visibility and easy accessibility? Or is it a warehouse, where location is much less important. Features are another factor to consider. If your investment will be targeting companies that use heavy equipment, those tenants usually look for bay doors, high wattage power sources, and sometimes even overhead cranes. Along with factors, the previous use of the building is worth noting. Dentists and doctors can consider old restaurants as potential offices. Cafes sometimes occupy old banks. The flexibility of the building can make or break an investment.
Other considerations include maintenance responsibility, how common areas are shared, and utility costs. For more information about these spaces, visit the Commercial & Industrial page of the site.
Vacant Land Investment Properties
Vacant Land investments can pose the most difficulty when it comes to income generation. Options to generate income are usually limited.
The most common tenants of vacant land are farmers. Rent payments from farmers can help offset property taxes and lower the taxes themselves since farm land is taxed differently. If the land is heavily wooded, allowing a company to harvest the trees for timber is also a great income generator. Companies will pay the owner a fee for the right to the trees. If the land is zoned commercial, there is potential to lease the land to a business, or allow a business to use it as storage or parking.
The biggest appeal to vacant land for many investors is the minimal amount of effort required to maintain the asset. Maintaining residential investments and commercial investments can be time consuming. Vacant land can be likened to precious metals. An investment that does not require attention, but increases its value based on scarcity and relative markets. For more information regarding the purchase of vacant land, please see the Vacant Land page of the site.