Real estate is technically land with any tangible improvements made to it, such as buildings. Property rights give the title to an owner who can make improvements and utilize natural resources. Real estate can’t be moved and is called real property as opposed to personal property, which can be moved. There are many different types of real estate, and they each have different purposes and uses.
The main categories of real estate are land, residential, commercial and industrial. Here is more information about these estate market types to help with understanding exactly what they are.
Residential real estate
Residential real estate is the most common type and consists of housing for families, individuals or groups of individuals. Within residential housing are many different types of housing to suit various purposes, such as single-family homes, condominiums, apartments, and townhouses. A single-family home is designed to accommodate one family. A condominium has many units owned by individual people. Apartments are also individual units that are often rented out, and they are found in multi-unit buildings. A modern townhouse often has a small footprint but multiple floors.
Residential real estate refers to new homes and the resale of existing homes. Investors may decide to buy a house, improve it and sell it. Others use Airbnb or other services like this to rent out part of their homes. Several investors own various residential homes and rent them out to tenants.
Evernest, Mynd and APM are property management companies in Denver and many other areas to help landlords manage the day-to-day responsibilities that come with renting out properties. This includes finding and managing suitable tenants, performing maintenance and repairs, collecting rent and evicting tenants.
Commercial real estate
Commercial real estate is property used exclusively for business purposes. Some examples of commercial property are stores, office buildings, hotels, resorts, restaurants and healthcare facilities. Office space usually has various types, such as class A, B, and C buildings. Class A represents the best buildings in terms of age, infrastructure, location etc. Class B buildings are usually older and not as competitive price-wise. Class C buildings are usually over 20 years old and in need of repairs.
One of the main benefits of leasing out commercial real estate is the considerable monthly cash flow it can generate. Investors who lease it out can generate great monthly income due to the lease rates. It can not only generate income but offers the opportunity for capital appreciation for investors. It usually requires more capital from investors than investing in residential real estate.
Commercial leases usually run for much longer than residential leases, which gives commercial real estate holders reasonable cash flow stability. Businesses may occupy office space or retail space for up to 10 years or more. Different types of leases require varying levels of responsibility from landlords and tenants.
Real estate investment trusts (REITs) provide a way for individuals to invest indirectly in commercial real estate. They often own or finance many types of commercial real estate, including office buildings, hospitals, shopping centers, etc. Companies have to meet various requirements to qualify as REITs. For example, they must pass at least 90% of profits on to investors. They offer investors an easy way to invest in a publicly traded stock that offers them various advantages such as portfolio diversification and competitive market performance.
Industrial real estate
Industrial real estate is some of the most valuable property to own because the sector is so important to society. Industrial buildings are required for producing and manufacturing goods, doing research and development, assembly, storage and distribution. Specific areas in a city are designated for these operations, so they cause the least amount of disturbance to businesses and residents. Factories, warehouses, heavy manufacturing and light assembly space and cold storage warehousing fall into this category.
Industrial properties, like commercial properties, are ranked into Class A, B and C. Class A assets are priced high but carry fewer risks for investors. Rental income from a Class B industrial property will be lower, but it may even be possible to convert a Class B property into a Class A one with some renovations. Class C properties are the oldest ones and can be a good option for investors willing to put in some time and effort to restore them.
Investing in industrial real estate can be lucrative as industrial businesses sign long-term leases. This ensures a stable, long-term income. Vacancy rates are normally low, and if there is turnover, it doesn’t take long to find a new tenant. It is also easy to liquidate industrial real estate as there is almost always an investor looking to purchase. Industrial properties also tend to be less of a hassle to deal with as an owner than commercial properties, which often require a great deal of maintenance.