If you want to invest in real estate properties, one of the most important criteria (aside from location) is the type of property. While considering a purchase, you need to ask yourself, from which properties you will benefit the most, for example, residential homes, office towers, shopping malls, warehouses, or a combination of any of these.
Every type of real estate has a different set of virtues influencing its performance. You need to conduct thorough research to find out which kind of property will perform well in a market and which won’t. Similarly, you can’t assume one type of property will continue to be a good investment just because it has performed well in the past.
Let’s review some of the options
Broadly speaking, there are four types of income-producing real estate: leased residential, retail, industrial, and offices. There are also other less common types as well, such as hotels, parking lots, seniors care housing, and mini-storage. It is critical that among these investments, you choose the one (or two) that is income producing.
Residential real estate
Real estates are properties such as residential buildings, apartments, condos, vacation houses, and townhouses where a person or family pays you to live. The length of their stay depends on the lease contract they sign with you. Most real estate investors choose the residential real estate to enhance their monthly income though rental earnings. You can also raise the monthly rent for it to be higher than the monthly mortgage – this way you will get you benefits of dividends.
Commercial real estate
The commercial real estate includes mostly office buildings and skyscrapers. They tend to be, on average, the largest property type because of their location in downtown cores and suburban areas.
Besides buying already existing office space, you can also use your savings to construct a small building with individual offices and then lease them out to companies and small business owners. Because commercial reals estate typically involves multi-year leases, it leads to greater stability in cash flow, and even protects the owner when rental rates decline. Moreover, in times of prosperity, offices tend to perform extremely well, because of the increasing demand for space, which causes rental prices to rise for an extended period.
Industrial real estate
The industrial real estate includes everything from industrial warehouses leased to firms as distribution centers over long-term agreements to car washed, storage units and other special purposes real estate that generates sales from customers who temporarily use the facility.
Generally, industrial real estates require smaller average investments, easier to manage and have lower operating costs compared to office and retail counterparts. Moreover, to increase your revenue, you can add significant fee and service revenue, such as coin-operating vacuum cleaners at a car wash.
There are several critical factors to consider in an industrial property to make it functional. You need to estimate the dimensions (ceiling high, width, length) and chose location close to major transport routes (such as railroad or highway), and have a degree of specialization in the space (such as whether it has cranes or freezers). You also need to consider that for some renters, the presence of outdoor yard space is important.
Mixed-use real estate investments
Mixed-use real estate investments combine any of the above categories into a single project and are rapidly becoming one of the most popular assets in the U.S. development. An example would be a small storefront building with apartments above and retail below. It can be a single-family property with a ground floor doctor’s office.
Mixed-use real estate investments are highly popular because they have a degree of built-in diversification, which is important for controlling risk. However, if you are considering investing in such asset, you need to be aware that changing the building’s certificate of occupancy from commercial to residential can be hard. Often, buyers do not inspect the certificate of occupancy and do not realize until after purchasing a building that it was commercial. Be sure to check it before buying any property.
Mixed-use properties can be commonly found in packed areas, such as Manhattan, Atlantic Avenue, Court Street, and Franklin Avenue. These areas are abundant with commercial storefronts topped with apartments.
Hiring a property manager
Many investors who want exposure to rental real estate hire an experienced property manager to do all the heavy lifting. If you do the same, you can get the benefits of being a landlord, without all the hard work.
Here are a few of the benefits a property manager can offer
- Tenant screening: an experienced property manager will help ensure tenants are a right fit for the property and that they are compatible with neighboring tenants.
- Marketing and advertising: a full-service property management service will have access to several platforms, and possibly a designated team to market any vacancies your property may have. This will offer a significant advantage when it comes to filling your properties quickly and avoiding long vacancies
- Maintenance: repair and maintenance expenses are inevitable, whether its basic repairs or emergency failures. An experienced property manager has a network of vendor contacts, as well as the problem-solving skills to find the best solution in a timely manner.
- Accounting: financial reporting is the key to measuring a property’s performance. Property managers will provide comprehensive reports including budget vs. actual variance analysis.
- Rent collection: having a third party between the owner and tenants is often an effective way to aid the rent collection process. A property manager will consistently follow and enforce the owner’s rent collection policy, handle tricky situations and collect late charges
- Legal issues: any property may be encumbered by legal issues or subject to code requirements and government regulations. Knowledgeable property managers are familiar with local, state and federal regulations and codes and can help identify compliance issues that may require further legal counsel.
If you want to rip the benefits of hiring a property manager, consider using COBE Real Estate full-service commercial brokerage and property management services. With over 50 years of real estate experience, COBE might be the best solution for your commercial real estate needs. Instead of wasting your own time, visit COBE website and simply inquire about their listings and see which properties are currently on the market.