Real Estate Asset Classes

Investing in real estate today is one of the most commonly used ways of growing wealth due to its possibilities of producing great returns for its investors. That’s why I’m not surprised that you are interested in diving into it in the near future as well.

However, first, you should explore its huge market from afar to decide where you want to put your capital in - commercial real estate contains various categories, also known as asset classes and in this blog post, we will be explaining what they are and what are the differences between them.

1. Multi-family.

Multifamily properties are one of the most commonly invested in asset classes of real estate, they contain at least 5 residential units and are used by multiple families for a living. Its popularity is caused by many factors such as guaranteed safe and stable cash flow in the form of rent money, collected from the tenants every month.

Investors also tend to invest in real estate to minimize the risk and make sure they will be getting monthly profit from their investment. For example, if you are investing in a multifamily property with 10 units and 4 of them are vacant for some time, you are still earning rent money paid by the other 6 families. It is practically impossible for your investment in multifamily to underperform, that’s why either if its newbie investors or already experienced people who just prefer making safe moves prioritize multifamily properties.

2. Office.

Office includes properties designed for either a single or multiple tenants and is rented for typically a long-term period. Investing in office buildings is great during economic expansions as companies tend to expand their business and are in need of new working spaces.

However, compared to multifamily properties, investing in the office can get quite risky during an economic crisis and may lead to the bankruptcy of the business and this is an additional reason why investors choose residential properties, as no matter what happens, people will always need a roof over their head.

3. Retail.

Retail properties consist of various buildings such as shopping malls, grocery stores, clothing stores, and more. The benefits of them are that in most cases they are rented for 5 or more years and should generate a predictable, long-term income for its investors.

Investing in retail properties is great for people who are willing to rent properties long-term, but keep in mind that you won’t be able to change the rent price according to the current market state, meaning that you will be earning the same amount of cash despite the value of your building growing.

4. Industrial.

Industrial real estate includes all the buildings, big or small suited for industrial activities, such as manufacturing, warehousing, distribution, etc.

They are mostly rented for years, however, once again this type of leases can lead to underappreciated lease payments, and additionally re-renting industrial building can get sketchy, as they were designed specifically for the previous tenants and might not be suitable for new ones.

5. Hospitality.

The hospitality asset includes properties like hotels, motels, travel centers, or living spaces for students, where clients also pay for additional services like food and beverage. They are most popular in the cities with the highest tourism rates and their price depends on the worldwide financial factors as well as unpredictable natural disasters such as the current pandemic in the world.

Conclusion:

No matter what way you look at it, investing in the multifamily asset is the safest option for any type of investor. But obviously, to generate as much income as possible, you need to make smart choices, which can definitely be hard when investing for the first time. That’s why I want to offer you our help and guidance through it all, don’t hesitate to contact us today so you can learn more about generating safe and stable cash-flow without taking any risks.