While many new investors come to terms with the concept of real estate investing, they fail to realize that there are different types of real estates with diverse nature and opportunities to present. Each type has its benefits and disadvantages to offer, including their own unique part to play in cash flow cycle, lending trends, and other industry standards. Therefore it is not uncommon to find some people who have built fortunes by specializing in the market of a particular type. Here are the different types that you can choose from and build up your portfolio.

1.Residential investments

Places like apartment buildings, houses, vacation houses, etc. where a person or family pays you to live in that property. Clients sign rental agreement that states the duration of their stay in the house and lease agreements they sign with you. Most residential leases are signed on the basis of twelve months in United States.

2.Commercial investments

These investments mostly consists of office building and skyscrapers. If you have enough capital to build a small building and separate office suites in it, then you can rent these offices to companies or small start-ups who would pay you monthly rents as per signed agreements. Long-term lease can also be formed where you rent out these offices for multiple years to your clients. One major benefit of long-term leases is rent amount won’t get affected in case rental rates decline in future. But in case the market heats up or rent rates rise in future, then you are restricted and unable to revise the rent as per the old agreements signed.

3.Industrial investments

Investments like industrial warehouses, distribution centers, storage units and other industry related facilities are included in this type. Short to long term lease agreements are signed by buyers to use the property for particular industrial uses.

4.Retail investments

Investments includes shopping malls, strip malls and other retail shops in the market. In some cases, the landlord or owner receives a fixed percentage on retailer’s sales along with base rent. This motivates the property users to keep the property in top class condition throughout its lease duration.

5.Mixed use investments

These are investments that combine any or all of the above categories. Consider the following scenario: An investor purchases a mid-size town out of his several million dollars savings. He approached a bank for a loan and built a mixed use four-story building that had several retail shops around. The bank that provided the loan, took out a lease on one of the building’s floor, hence generating a nice rental income for the owner. Then other floors were leased by an insurance company and other businesses. The surrounding shops are then leased by a fitness gym, hair salon, a restaurant, and a sports shop.

Mixed real estate investing like in the above case are popular with investors with significant assets at hands and have quite an experience in built-in diversification, which is an important tool in risk management.

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