You must have been reading about multiple ways to invest in real estate, and now you’re probably wondering about the best possible thing to do for a higher ROI, right? What do people mean whenever they mention 4 types of real estate property?
If you are just starting and took an interest in real estate, you might have felt really confused because everyone else was talking about these different types of properties that you didn’t know. It can be like an odd member in a group of even where everyone knew a secret. Here we’ll go through with four different categories in which real estate is divided into, and once we took the time to learn about it, everything will start making much more sense.
Let’s now get on with it. Real estate is not rocket science; it just sounds complex unless someone explains it in simple words.
Residential Real Estate for Homes
This is easy because we all have a place to live, right? Houses, apartments, and townhouses, where people sleep and call home. Many first time property buyers start with a small studio that may cost way too high for them, bit it still considered as a good residential real estate.
Real-life events affect residential properties. When families move to new place and have children, they eventually need more space and bedroom. When professional got a promotion, they often wanted to move closer to the city. When people retire they usually shift to the smaller condos with minimum maintenance. These people aren’t making complicated financial choices; they’re just living their lives.
A lot of people think residential is a good investment because they already know how it works. You know what makes a place desirable because you’ve looked for places yourself. We’ve all thought about things like good neighborhoods, good schools, and reasonable commute times.
What are the downsides? You’re basically becoming a landlord, which means you’ll have to deal with problems with people. Late rent, broken water heaters at 2 AM, and that tenant who somehow put a hole in the bathroom wall. But the money usually comes in regularly, and property values tend to rise over time.
Checkout more off plan residential apartment here
Commercial Real Estate for Business
Now we’re talking about places where work gets done. Office buildings, malls, restaurants, hotels—basically any place where people go to work or spend money instead of living.
When I first started learning about this, I thought it was interesting that businesses usually sign leases that are much longer than those of regular people. For example, if you rent an apartment, you might move in a year or two. But a business might promise to stay in the same office for five or ten years. If you own the building, that’s a pretty good deal.
Many commercial property owners find this market more stable compared to the residential rentals. They often imporve their leased spaces themselves, pay higher rent, and maintain longer lease agreements. Sounds good, right?
But here’s the catch: businesses are the first to feel the effects when the economy goes bad. During the last recession, she saw a lot of tenants leave, leaving her with empty offices that were hard to fill. The economy can make or break commercial real estate.
Industrial Real estate for businesses
We use this stuff every day, but most of us don’t think about it. Warehouses, factories, and distribution centers are places where products are made and stored before they get to us.
Have you ever ordered something online and thought about where it came from? It probably sat in at least two or three different industrial buildings before it got to your door. That’s a big business, and someone owns all of those buildings.
One great thing about industrial properties is that the tenants tend to stay for a long time. Moving a factory or distribution center is a huge, expensive job, not like packing up an apartment. So businesses that rent these spaces usually stay there for a long time.
About ten years ago, a friend of mine bought a warehouse close to the airport. It’s just a big concrete box, nothing special. But with all the growth in online shopping, that “boring” property has been his best investment. There are times when such boring properties turn out better than you ever imagined they would.
Land
This one is hard because here we’re talking about raw, undeveloped land, empty lots, farmland, and that strange empty space at the edge of town that makes you wonder what the owner is planning.
Land doesn’t make any money on its own, unlike the other types. You have to farm it or rent it out for parking to make money. You’re basically betting that someone will want to build something on it or that the area will grow and your land will become valuable.
A notable example involves an investor who acquired a farmland outside a city area about 20 years ago. At the time, family members and friends questioned the decision, considering it nothing more than empty fields in an undeveloped location. As the city continued expanding over the years, developers began showing interest in that area. Today, that investor is sitting on extremely valuable property that has appreciated significantly.
Doing your homework, like researching the property, and, to be honest, a little bit of luck to invest in land. You need to go through the planning, designing, and the development of infrastructure. Not everyone will like it.
Making Sense of It All
So that’s it – 4 categories that cover everything:
- Residential: Where people live
- Commercial: Where people work and shop
- Industrial: Where products get made and moved
- Land: Raw property waiting for its moment
Each one responds to different things happening in the economy and society. Residential follows where people want to live. Commercial tracks business growth. Industrial benefits from manufacturing and shipping trends. Land speculation is about predicting where development will happen next.
How This Connects to Investing
Remember those investment strategies we talked about before? Now you can see how they fit with these property types. When you hear about REITs, they might be buying commercial buildings you could never afford individually. That house-flipping strategy? That’s residential real estate. Those new crowdfunding platforms for warehouses? Industrial properties.
The neat thing is, once you understand these categories, you can match them with investment approaches that fit your personality and situation. Like hands-on projects and understand home renovation? Residential might be your thing. Prefer passive income and understand business trends? Commercial REITs could work.
Conclusion – The 4 types of real estate
Look, real estate isn’t this mysterious, complicated world – it’s just 4
types of real estate properties, each with their own quirks and opportunities. You don’t need to become an expert in all four tomorrow. Many of the successful people I personally know gathered everything about real estate and went deep, and have built an empire with it.
The bold thing here is being honest about what suits you the best, how much time you can invest, and what level of risks you can take and be comfortable with it. There’s no right or wrong answer – just what works for your life.
Which type makes you curious? What questions are in your mind about getting started? Feel free to drop a comment – we’d love to hear what you’re thinking about real estate.
