Real estate in a country is one of the oldest and most traditional asset classes. Many new investors in real estate know that, but what they do not know is how many different kinds of real estate investments exist.
Each kind of real estate investment has its potential advantages and pitfalls, including unique quirks in cycles of cash flow, lending traditions, and standards of what is considered appropriate or reasonable, so you will want to study them entirely before you start adding them to your portfolio.
As you read these different types of real estate investments and learn more about them, it is not unusual to see someone build a fortune by learning to specialize in a particular time.
Categories of Real Estate
If you are intent on owning, developing, acquiring, or flipping real estate, you better come to an understanding of the characteristics of what you are getting involved in, by dividing the real estate into specific categories.
Residential Real Estate
Residential structures are properties such as townhouses, individual houses, apartment buildings, and vacation homes where a person or family friends pay you to live in the property. The time of their stay is based upon the rental agreements, or the contracts they sign with you, known as the lease agreements. The majority of residential leases are on a twelve-month basis in Real estate Pakistan.
Commercial Real Estate
The commercial property includes mostly of things like skyscrapers and office buildings. If you want to utilize your money in constructing a small building with offices, that is an excellent regular income idea. This is because you could rent the offices out to small or medium-sized business owners or companies, who would compensate you with sufficient rent regularly for using the property. It is not unusual for commercial real estate to involve multi-year leases. This can point to greater stability in cash flow, and even protect the owner when rental rates decline. Still, if the market goes up and rental rates increase considerably over a short period, it might not be possible to take part as the office building is locked into the past agreements. This type of property investment in Pakistan is quite common and beneficial.
Industrial Real Estate
Industrial use real estate comprises of everything from industrial warehouses leased to firms as distribution centers over long-term agreements to car washes, storage units, and other specific purposes real estate that produce sales from customers who provisionally use the facility. Industrial real estate investments usually have significant fees and service revenue streams.
Retail Real Estate
Retail properties consist of shopping malls and other types of retail storefronts. In many cases, the landlord also receives some percentage of sales generated by the renter store, plus a base rent to incentivize them to keep the property in perfect condition.
Mixed-Use Real Estate
Mixed-use properties are those properties that combine any of the above categories into a single project. An investor in Karachi took several million dollars in savings and found a mid-size town. He went to a bank for financing and built a mixed-use four-story office building surrounded by retail shops. The bank, which granted him the money, took out a lease on the first floor, producing significant rental income for the owner. The rest of the levels were leased to a health insurance company or any telecom company and other businesses. The surrounding area was rapidly leased by a gym, restaurant, an upscale retail shop, and a hair salon.
New Construction and Raw Land Investing
Raw land investing and new construction describe two different types of real estate investment that can assist in diversifying an investor’s portfolio. Raw land points to any free land available for purchase and is most attractive in markets with high projected growth. New construction is not much different, though, properties have already been built on the land. Investing in new development is also common in quickly growing markets.
While many investors may be unknown with new construction and raw land investing, these investment models can represent engaging profits for investors. Whether you are interested in building a property from start to finish, or profiting from a long-term buy and hold, new construction and raw land provide a unique opportunity to real estate investors.
To maximize gains when investing in new construction and raw land, investors should complete comprehensive market research. This will assure you to choose a desirable area and will also restrict the investment from being hindered by market factors.
What is the Best type of Real Estate Investment?
The best type of real estate investment will depend on your circumstances, market area, goals, and preferred investing strategy. While many investors want a more direct answer, determining the most suitable type of investment property is a subjective process. Choosing the right property model comes down to weighing the advantages and disadvantages of each option, though there are several key factors investors should keep in mind as they explore the best choice.
When it appears to decide the best type of investment property, the importance of location cannot be underestimated. Investors operating in “up-and-coming” markets may find success with new construction or vacant land, while investors working in more “mature” markets may be interested in residential or commercial properties.
Apart from location, investors should also be informed of their own choices when it comes to investing. Evaluate your preferred level of involvement, profitability, and risk tolerance as you decide which property type to invest in. Investors wanting to take on a more passive role may opt for buy and hold residential or commercial properties and hire a property manager. Those wishing to take on a more active role, on the other hand, may find developing vacant land or rehabbing residential homes to be more fulfilling.
As you pick the best type of investment property for you, it is also essential to bear in mind that many investors find success investing in a variety of property types. It is not unusual for investors to familiarize themselves with the residential real estate market before moving on to commercial properties, for instance. There is no reason investors cannot achieve success by investing in various property types.