There are three major property types that real estate investors or landlords may want to own and specialize in: vacant land, residential properties, and commercial properties. Depending on a few factors like your location and the value of the properties in your area, one of these types could afford you a larger return on your investment. If you're looking to get into the real estate business, here's what to know about each type of real estate property.
Key Takeaways
- There are three main types of real estate properties: vacant land, residential properties, and commercial properties.
- Vacant land allows you the opportunity to either build something or lease it out.
- Residential properties usually consist of single- or multi-family houses, both of which you could own and rent out for a profit.
- Commercial properties consist of both land and buildings, usually used for businesses and office space.
Vacant Land
Vacant land can be used for farms, ranches, residential, or commercial properties. If you're looking to buy and rent, buy and build, or buy and sell vacant land, there are a few things to consider.
Property sizes and prices are typically quite large, and real estate agents usually get a corresponding commission. For example, in Newburgh, New York, buying vacant property and rehabilitating it usually costs between $50,000 and $500,000.
Note
Depending on your location, vacant land may be difficult to come by, or it may be further away from the city and your office.
If you're looking to invest in vacant land purchased with the intent of development, check on its water supply. You may have to have the land inspected within a certain time frame, too, such as six months. The listing and transaction process is significantly simplerandthere are no structural inspections, floor plans, or insurance issues to address.
Residential Properties
Residential property is by far the most popular with both new and experienced real estate investors. Residential properties consist of single- or multi-family houses, vacation homes, duplexes, condominiums, and more. They can be new construction or existing homes for sale.
As a real estate investor, you may be able to buy a home at auction for a good price. If you're able to acquire the property for a low dollar amount, you may be able to invest more in it before renting it out or selling it for a profit. You can usually find information about properties for sale at auctions on your state's website, including information on the date of the auction, minimum bid, maximum bid, and previous properties sold.
Condominiums are also a good option if there are any in your area. You may be able to start out owning one and renting it out for additional monthly income. Eventually, you may be able to own a second or third.
Note
Residential properties can be good investments, but make sure you track the market. Home prices can fluctuate greatly, and the higher a property costs, the less return on investment you can get (at least in the short-term).
Commercial Properties
Commercial properties can be empty land zoned for commercial useor existing business buildings.
Commercial property valuation requires a more complex accounting method includingincome potential of the property, historical revenue, cash flow with owner perks removed, and much more. Withoutextensive business valuation experience, it's better to enter this specialization carefully and after building experience in the undeveloped land or residential property sectors.
As far as office buildings, supermarkets, shopping malls, industrial, gas stations, and other commercial property types, it's a more complex business, but incomes are better if you're good at it. Sub-niches, such as only investing in strip malls and shopping centers,are also common.
Frequently Asked Questions (FAQs)
How can you invest in real estate without buying property?
If you're looking to get into the real estate investing game, but do not want to be a landlord or property owner, you can invest in real estate investment trusts (REITs), real estate exchange-traded funds (ETFs), or stocks of real estate companies.
What does a property manager do in real estate?
A property manager oversees the operations of a property, from answering tenant questions to collecting fees and rents. The property could be residential or commercial property.
FAQs
The 5 major types of real estate investors
- 1) REIT investor. ...
- 2) Institutional investor. ...
- 3) Private estates. ...
- 4) Family offices. ...
- 5) Private equity.
Property law in the United States is complex and multifaceted, but these laws pertain specifically to three distinct types of property. Both state and federal laws exist to protect real property, personal property, and intellectual property.
What are the three types of property? ›
There are three types of property classifications in California law: community property, separate property, and quasi-community property. It is important to know the differences between them, because the definition of a property determines who has ownership and control of the property.
What are the classification of real estate investments? ›
There are five main categories of real estate which include residential, commercial, industrial, raw land, and special use. Investing in real estate includes purchasing a home, rental property, or land.
What is the most common type of real estate investment? ›
Single-family rental property: Single-family homes are the most standard and well-known type of rental property investment, and they can be a perfect option for those looking to invest in real estate.
What are the most profitable types of investment properties? ›
High-Tenant Properties – Typically, properties with a high number of tenants will give the best return on investment. These properties include RVs, self-storage, apartment complexes, and office spaces.
What are the most common property types? ›
What are the most common property types? There are five common property types. These property types include residential property, commercial property, industrial property, land as a property type, and special purpose property.
What are the two main classifications of property? ›
There are two basic categories of property: real and personal.
How many types of properties are? ›
Types of property: Movable property and immovable property
In India, property is classified into two broad categories - movable property and immovable property. Movable property: Movable property refers to assets that can be easily moved or transferred from one place to another.
Which type of real estate is best? ›
Commercial real estate
In addition to paying rent, the tenant might also cover property taxes, insurance, repairs, and maintenance, depending on the lease agreement. Commercial real estate generally offers greater income potential, lower vacancy rates, and longer leases than other real estate types.
All kinds of tangible property can be considered corporeal property. it can be divided into two categories: movable and immovable property and personal and real property as it is ownership rights. Incorporeal Property: Incorporeal property means all kinds of intangible property.
What is the difference between assets and property? ›
Property is anything that can be owned, such as a house or claims to a resource (which includes land). In contrast, an asset is anything worth something. Unlike property, assets don't have to be tangible objects that you physically own. For example, stocks and bonds are considered assets.
What are the 3 classifications for investment accounting? ›
Investments in Financial Assets
As time elapses and the fair value of the assets change, the accounting treatment will depend upon the classification of the assets, described as either held-to-maturity, held-for-trading, or available-for-sale.
What is an example of an investment property? ›
Examples of commercial investment real estate include office buildings, retail centers, industrial warehouses, medical offices, and mixed-use developments. Commercial properties generally require higher capital and can provide stable, long-term tenants. Benefits include: Long-term leases provide reliable rental income.
What type of real estate investment has no real property ownership? ›
Wholesaling. Wholesaling is the only active form of real estate investing that does not require property ownership.
What are the three categories investors usually fall in? ›
Three of the main types of asset classes are equities, fixed income, and cash and equivalents. For individual investors, these are more commonly referred to as stocks, bonds and cash. An investor's asset allocation, or mix of asset types, is the foundation of portfolio construction.
What are real estate investors called? ›
Someone who actively or passively invests in real estate is called a real estate entrepreneur or a real estate investor. Some investors actively develop, improve or renovate properties to make more money from them. Real estate makes up the largest asset class in the world.
Which is better a realtor or an investor? ›
To wrap up, close the deal with an investor if you want uncomplicated, more convenient transactions and sell your property as soon as possible. However, work with a realtor if you are a real estate newbie needing guidance and assistance selling your house at a higher price.
What are the three main valuation methods for investors in commercial real estate? ›
The Income Approach estimates value based upon typical market income of a similar property.
- Cost Approach to Value. In the cost approach to value, the cost to acquire the land plus the cost of the improvements minus any accrued depreciation equals value. ...
- Sales Comparison Approach to Value. ...
- Income Approach to Value.
