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5 Types of Real Estate Investments and How to Choose One

5 Types of Real Estate Investments and How to Choose One

Investing in real estate can be exciting and worthwhile. Its potential and value make it a popular choice for investors, both beginners and experts alike. However, you can easily get overwhelmed with the many options for real estate investments, especially if you’re unaware of what each offers.

Not knowing the differences and similarities between each type can make or break your venture. With that, here are the different types of real estate investment and how you can choose the right one for you.


5 Types of Real Estate Investment

1. Residential

Residential properties are the most common type of real estate investment. It includes properties that people can live in with leases from 6 to 12 months, such as homes, townhouses, condominiums, and apartments. This type of real estate investment usually takes a great amount of effort and money to sustain but can give you a huge return on investment.

For example, investing in a condo and improving its quality can bid high on the market. This can provide you with an extra monthly income if you decide to rent it out or a lump sum when you sell it. 

2. Commercial 

These are properties you can rent out to businesses for operations, such as office spaces. Commercial properties like buildings and skyscrapers are great for generating stable cash flows because leases tend to last for years, protecting you from any downsizing of rental rates.

The difference is that this can yield higher returns than residential ones. Since its value depends on the revenue generated, instances like a booming business renting your office space can significantly increase your ROI. 

3. Industrial

Similar to commercial properties, industrial properties can provide a stable revenue stream for the owners. These properties have a special purpose: storing inventory, showrooms, and more. This type consists of industrial warehouses, storage units, car washes, manufacturers, and the like. You can implement charges for this property, like service fees, to increase your returns.

4. Retail

Retail properties are another type of real estate investment you can rent out to retail businesses such as clothing stores, fast food restaurants, department stalls, and the like. Retail properties include shopping malls, strip malls, and factory outlets. 

Like a commercial property, retail properties increase in value when residing stores generate significant revenue. However, the retail property owner will receive additional income according to a percentage of the tenant’s revenue on top of their rent, ensuring that they keep the property in mint condition. 

5. Mixed-use

As the name suggests, this investment combines any of the abovementioned properties. For example, it can have retail stores on the lower floors and condo units at the top. With this combination, you can have a mixed revenue stream from different property types. Investing in this is great for diversifying your portfolio and mitigating the risks of real estate investment


How to Choose a Real Estate Investment

Each type of real estate investment attracts a particular kind of investor. However, whether you are a beginner or expert in real estate, you can still diversify your portfolio and go through the process of choosing a real estate investment every single time. Here are some tips in picking your first or next investment:

  • Study the current real estate market

With most investment opportunities, markets can fluctuate, and the real estate market is no different. You have to consider the best timing of when you can invest in real estate. Remember to buy low and sell high for the best ROI. With that, you’ll know when to invest in a condo that enables you to maximize your profits.

  • Establish your investment goals 

Before venturing out on your investment, set goals you want to achieve. This can help you decide what type of property you should go for. If you wish to have your own place, you can invest in a residential property. But if you want a steady income stream, you can pick either commercial space or retail property. Just make sure to set achievable and realistic goals. 

  • Find the perfect balance between price, property, and position

Once you’ve got your goals, it’s time to lay down your options. For instance, properties far from the city center and away from transport may not cost as much. However, those close to prime locations and a transport system tend to give higher returns. With that, make sure you choose a property that strikes a balance between all three factors.

  • Go with an appropriate mortgage

Real estate investments can be pricey, and you may not have enough funds to obtain one. With that, you have to carefully choose the best mortgage plan suitable for your current situation. Loans and mortgages can help you jumpstart your real estate investment. However, it can also cause you financial distress if you’re not careful and attentive with your payments. 

  • Consider the investment with the most positive cash flow

If you’re going to take out a loan, you’ll have to be strategic with your cash flows. Although they give high returns, real estate investments may render low liquidity. Thus, check the available options and go with ones that will provide a positive cash flow even after the expenses and fees. 

  • Do your research

Lastly, research more on the properties you have on your roster. It’s good to know who the developers are of that property and if they have a good reputation. Conducting a background check on their past projects can give you an idea of whether they are the best developer to go with or not. This can save you the trouble and money from subpar structures. 


Which Property is For You?

Real estate investments are high commitments but give high returns if you know what you’re doing. There are several types of real estate investments that you can choose from, but this can make it challenging and overwhelm you, especially if you’re unaware of their similarities and differences. Decisions should be made with utmost precision.

By conducting extensive research, you’ll understand the different types and other specific details within the market, helping you make the right decision. If you are looking to invest in commercial spaces with office options or mixed-use real estate, you can reach out to our experts in Mandani Bay. We have strategically located condos for sale in Cebu, and nearby corporate centers like the One Mandani Bay. Experience luxurious condo living and an elevated professional lifestyle.