Real estate investing can be a great career, if you keep your wits about you and handle things right. However, it is possible to make big mistakes if you are not well educated. That is why knowing the different types of commercial properties can be very helpful. Being aware of the different types of commercial real estate gives you access to the benefits and drawbacks of each. Here’s a bit of information to help you get started.
Commercial real estate covers a wide range of properties, including apartments, shopping malls, office buildings, shopping malls, distribution locations, warehouses, and research properties. Some properties fit into two of these categories at once, such as buildings that combine industrial and office uses. These are known as flex properties. If the property contains more than half of its area in office space, it is called office/flex. When it is primarily for industrial use, it is called industrial/flexible. Other flexible properties may include commercial or laboratory areas and research and development areas.
Hotels may also fall under the category of commercial real estate. However, some investors view a hotel as more of an operating business and classify them with the subset of properties that include nursing homes or assisted living facilities and casinos. The one thing all commercial properties, with the exception of virgin land, have in common is that they are capable of producing income. That income may come in the form of capital gains, or it may be through receipt of rent from tenants.
In addition to these main types of properties, you can also see commercial real estate categorized as niche properties. This category includes specialty properties such as apartments built for students, age-restricted housing intended for older residents, self-storage, and office buildings that cater to a particular type of business, such as the medical field.
Uncultivated land is the last category of commercial property. This is undeveloped land with no existing structure on it. Some investors purchased this land with the intention of obtaining the correct permits to build commercial properties on it, within local zoning laws. These properties can then be used to earn income, either in the form of rentals or in the form of capital gains. Therefore, uncultivated land can also eventually produce income. It just does it in a less direct way.
Each type of commercial property comes with its own benefits and problems. For example, virgin land allows the developer to build as he or she chooses. However, the construction cost and time required is often greater than fixing up an existing property to your standards. Untreated land can make up for this by being less expensive than property that has already been developed, and is a great option if your project needs a specific location or you want to control the construction process. Uncultivated land can also be a great option if you can buy it while it is still zoned agricultural and rezoning it to commercial. The zoning change alone can add great value to the property.
Shopping malls generate a great deal of rental income, provided they are properly designed. Malls are similar, but may require a smaller initial investment as they can be purchased in a smaller size. It is important, when building this type of facility, to plan properly. Provisions for food and beverage outlets and adequate parking make a big difference in the amount of commerce that is available to generate income for your property.
Warehouses and self-storage units have the advantage of requiring a minimum of personnel and maintenance, although it is important to maintain them. Properties such as research and development or research laboratories may sell for a higher amount than if the building had a minor use.
Each type of property has its own characteristics. Picking the right one can take some work. Therefore, it’s a good idea to talk to people who have experience in the field to decide what type of commercial property investment is right for you. Doing your research before you invest and staying informed is an important part of succeeding in a commercial real estate investing career. Knowledge is the best way to avoid making a big mistake and can turn a potential loss of money into a gain.
