Time and again experts have declared real estate to be one of the most famous asset classes. Although the incoming investors and property investment company’s are aware of this declaration but, they sometimes lack knowledge about the right types of property investments that prevail in the market. Each type comes with its own set of pros and cons. Therefore, it is crucial for you to have knowledge about them before making the decision of choosing one amongst the lot.
Residential property investments:
This type of property investment includes apartments, buildings, townhouses, houses and vacation houses where people and families live by paying a certain amount to you, as per contract. The agreement which is signed between the two parties decides on the time span of their stay in. This agreement is also known as the lease agreement. Majority of the rental agreements are signed on a twelve-month basis, such as in the United States.
Commercial property investments:
Buildings such as skyscrapers come under this type of investment. If a person has extra savings which he can
invest in purchasing a real estate building, then he has the option of constructing separate offices in it. Furthermore, the investor can give out each of the offices on a rental basis to small-scale businesses or professionals.
It is quite a normal practice for commercial property investors to make use of multiyear leasing. This practice leads to investors enjoying a much better and improved cash flow as compared to the other types. It often tends to save the investors from facing the trouble of decline in the rental rates.
The only drawback, in this case, is that if in future the market is on the verge of heating up, then it is possible that the rates of rent will also increase. This will leave the investors with no choice but to stick with their old agreement since the time length is of twelve months. It is only after twelve months that the investors will be able to make the necessary changes in the rates.
Industrial property investments:
This type of property investment is very versatile as it includes everything from firms to industrial warehouses. The agreements which are signed in this investment are on a long-term basis to support the storage of units. It caters to businesses such as car wash as well because the sales that are generated are based on the temporary use of the facilities.
Service revenue streams and significant fee are two things which are quite common in industrial investments. An example of this could be to introduce such vacuums in the car wash, which are operated by coins. This will result in an increase in return which is paid to the investor.
Real estate investments:
Some of the most common properties which come under this type of investment include strip malls, shopping malls, and storefronts etc. Although this does not happen in every case, in some of them, the property investor or the landlord receives a certain percentage of sales which are generated in the business. This extra percentage is paid to the investor in addition to the annual or monthly rent so that the property is taken good care of and is kept in the best possible condition.
Mixed use property investments:
Under this investment, a combination is made using all of the above-stated categories. This may include an investor who is ready to purchase a big piece of land where a mixed-use building is constructed and is surrounded by various retail shops. It results in the investor being able to earn rent from all the sources. This type of investment is well suited for people with significant assets, and those who have knowledge about such a level of built-in diversification. It is crucial for controlling any possible risks and as a result, the investor enjoys a positive cash flow.