When it comes to investing money, real estate seems to be one of the most popular industries among majority of people. The reason is that real estate industry has all the potential to provide bigger profits in return of the investments made. There may be some risks involved but the amount of profits is something which tends to remain quite attractive for potential investors.
When we talk about investing in real estate, it’s not one area in which the investments can be made. Real estate is a vast industry which has a number of disciplines. Hence, the business rules for one area may differ entirely as compared to the others. Having that said, it is worth mentioning that there are different ways you can invest in real estate. Some fundamental ones are mentioned as under.
Residential real estate
This category involves investment in the properties such as houses, apartments, vacation houses, and townhouses. Majority of investments in this category involve buy-and-hold properties which the landlords rent out to the tenants. In United States, most of the lease or rental agreements are made on 12-month basis.
Commercial real estate
This type of investments usually involves properties such as office building and skyscrapers. With this investment, you can purchase or build a small building with multiple office sections in a commercial area. This building attracts small business owners and a number of companies. They enter into a lease agreement with you and pay the rent. The lease agreements in this scenario are usually long-term. The benefit of long-term agreements is that you would get the amount of rent as per the lease agreement even if the market rates drop. Thus, it is more stable kind of investment you can make. On the other hand, you wouldn’t be able to raise your rent if rent rates rise in your area as you will need to stick with the old agreement.
Industrial real estate
This kind of investment can help you generate revenue in two ways. You can either invite other people to enter into the lease agreement, which is going to allow those people to operate the area according to their business requirements, or you can use this area to do the business on industrial level by yourself. For instance, you can open a warehouse or storage unit. The revenue generated from this investment is even more stable as compared to commercial real estate. However, you will need to do fair amount of research before investing.
Retail real estate
You can invest money to build or purchase retail stores or shopping malls. In many cases, the landlords and retail store runners agree upon the share of profit to be paid to the landlord.