If you are getting started investing in St. Paul rental real estate, you may have observed that there are quite some options available today. Rental property investors, specifically, have several choices with regard to property type, size, and function. If you’re unsure which type of rental property is suitable for you, begin by recognizing the four main types of real estate and the purpose of each one. Then filter down your options until you locate the kind of rental real estate that fits your needs and goals.
Residential
The majority of new real estate investors contemplating a purchase, pick a residential rental property. Obviously, there may be a valid explanation for this: the residential real estate market is enormous! In 2020, it was valued at $33.6 trillion and continuously increasing. By definition, residential real estate is purchased and occupied as a dwelling by owners or tenants.
Within this broad category of real estate, there are many different kinds of residential properties: townhomes, duplexes, multi-family buildings, single-family residences, and so on. Due to lifestyle and renter demographic changes, single-family rental properties have been in high demand for years. This makes investing in single-family properties one of the most common options for new investors.
Commercial
On the other hand, commercial real estate is property used only as a workspace or to conduct a business or trade. The same as residential properties, there are numerous different types of commercial properties. Office space, retailers, restaurants, hotels and resorts, and even healthcare facilities all belong to the group of commercial real estate.
There are several advantages of investing in commercial real estate since it may be an advantageous alternative for some investors. Yet, the initial cost of a commercial property is likely to be much higher than a residential property, which can be a challenging obstacle for first-time investors to surmount.
Industrial
Although technically part of the commercial real estate category, industrial real estate is a different sort of real estate usually designated for use in very specific ways. Types of industrial real estate contain car manufacturers, storage and distribution centers, food processing centers, power plants, and research and development parks.
There are also three different classes of industrial real estate – A, B, and C – so it’s important to do your research if you are thinking about investing. Leases on industrial properties can be very lucrative and tend to be very long-term holdings. And, like commercial real estate, it can be very expensive to purchase industrial property, especially if such properties are in high demand.
Land
The fourth and final type of investment property you need to know about is a land investment. For the most part, raw or vacant land is purchased with the goal to develop it in some way or to utilize the natural resources on or under the land for profit.
For many investors who own land, this would involve selling leases that allow tenants to harvest minerals or water, oil or mining, timberland, orchards, or to use as farms, ranches, and recreational activities. Buying raw land, specifically, is a highly speculative investment that involves an equally high degree of risk. But under the appropriate conditions, leasing land may be a rewarding endeavor for a real estate investor.
With so many varied alternatives accessible, most real estate investors will focus on one type or sub-category of real estate. This can be especially helpful when you are just beginning, as it takes time to learn what you need to understand about investing in each type of real estate.
If you are prepared to begin investing in residential rental properties, we can assist! Our local St. Paul property management experts collaborate with investors like you to help find, prep and lease quality residential rental homes. Contact us us immediately to know more.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
