If you are just starting in the area of investing in Miami rental real estate, you might have noticed that there are several options out there. Rental property investors, in particular, have a number of options when it comes to property type, size, and function. If you’re not sure which type of rental property is right for you, start by knowing the four main types of real estate and the purpose of each one. Subsequently, limit your options until you identify the type of rental real estate that best addresses your needs and goals.
Most new real estate investors thinking about a purchase choose a residential rental property. Of course, there may be an excellent reason for this: the residential real estate market is enormous! In 2020, it was valued at $33.6 trillion and continues to grow. By definition, residential real estate is purchased and occupied as a home by owners or tenants.
Within this broad category of real estate, there are a variety of residential properties: townhomes, duplexes, multi-family buildings, single-family residences, and more. Thanks to lifestyle and renter demographic changes, single-family rental properties have experienced high demand over the years. This makes investing in single-family properties one of the most popular options for new investors.
On the other hand, commercial real estate is property used only as a workspace or to conduct a business or trade. As with residential properties, there are several different categories of commercial properties. Office space, retailers, restaurants, hotels and resorts, and even healthcare facilities all fall under the category of commercial real estate.
There are many advantages of investing in commercial real estate, as it can be a very profitable option for some investors. The drawback, however, is in the initial cost. Commercial properties tend to have a higher purchase price than residential properties. This can be discouraging for many new investors.
While technically part of the commercial real estate category, industrial real estate is a unique kind of real estate often used in very specific ways. Examples of industrial real estate include car manufacturers, storage and distribution centers, food processing centers, power plants, and research and development parks.
Additionally, there are three different classes of industrial real estate – A, B, and C – so it’s important to do your research before deciding to invest. Leases on industrial properties can be very profitable and they tend to be very long-term holdings. And, like commercial real estate, the purchase price for industrial properties is quite high, especially if such properties are in high demand.
The fourth and final type of investment property you need to know about is land investment. In most cases, raw or vacant land is bought with the intent to develop it in some way or to use the natural resources on or under the land for profit.
For most investors who own land, this would include extending leases that allow tenants to harvest minerals or water, oil or mining, timberland, orchards, or to use as farms, ranches, and recreational activities. Purchasing raw land, in particular, is a highly speculative investment that carries an equally high level of risk. But in the right circumstances, leasing land can be quite lucrative for a real estate investor.
With so many different options available, most real estate investors will concentrate on one type or sub-category of real estate. This can be particularly effective when you are just starting since it takes time to learn everything you need to know about investing in each type of real estate.
If you are ready to start investing in residential rental properties, we can help! Our local Miami property management experts work with investors like you to help find, prep and lease quality residential rental homes. Contact us today to learn more.
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