The term ‘investment’ tends to mean a lot of different things to each new person you meet. For some of us, the investment could refer to putting money into up and coming startup businesses – a move that had paid off for many an entrepreneur when said businesses have made it big. Or, it could be investing in something more tangible, such as gold, or diamonds, something many city big-shots actually did to survive the market crash of 2007/2008. But the number one most common investment that people from all backgrounds make every day is property. It’s no secret that owning a property is a huge personal asset – so it only makes sense that investing professionally, with a view to selling on, can make you some serious cash. Of course, despite it being something that many people do, it still doesn’t mean that getting involved real estate is something which should be taken lightly. You have to be exceptionally savvy and know the market like the back of your hand if you’re to have any chance of making good investments. There’s a lot of money at stake, and any careless errors could easily cost you hundreds of thousands in savings. It can also be beneficial to have a clear idea of what type of property you are going to hone in on before you start poking around in the market. There are three main sectors of real estate to choose from: residential, commercial, and agricultural. Then, within these sectors, there are many different types of property to choose from. The type you go for could mean the difference between a successful investment and one that falls flat on its face, so it’s important you get it right. If you’re struggling with where to begin, take a look at this handy guide for everything you need to know about different real estate investments.
Commercial property
If you own commercial property, it basically means that you own a building that is used as some form of work space. Usually, this means an office, but it can also stretch to refer to stores, restaurants or workshops. If your real estate is being used as somewhere that a business operates, it is a commercial property. There are many benefits to owning commercial property, one of the main ones being that this type of real estate is typically a good hedge against inflation. Commercial real estate also tends to only go up in value, as opposed to coming down, especially if various cost-effective improvements are made to the building. In addition to this, commercial real estate properties generally incur fewer costs to you as an owner, due to the fact that the properties are secured by leases. On that basis, the only real expense you need to worry about on your commercial investment is your mortgage, as everything else is taken care of by your lease-holding tenants. Think the whole thing sounds like a lot of work? Sure, it can be. But the final benefit to owning commercial property is that they tend to have limited hours of operation. Say, for example, you own a string of shops located in a shopping mall. That mall may close every day at 6 pm, meaning that unless there is an emergency, you are unlikely to be called out by a tenant overnight or in the evenings. If you want to invest in property but still want to have a regular 9-5 life, commercial real estate could be the best option for you.
Residential property
By far the most common type of real estate investment, residential property refers to any building created with the intention of being a home. Your own home is an example of residential real estate, and even if you have only rented thus far in your life, you are still unknowingly part of the residential property cycle. Residential real estate is a pretty viable investment as there are always people looking for homes – like commercial property, you will almost always make a solid return on whatever residential real estate you invest in. You only have to look at the difference in house prices from twenty years ago to today so see just how rapidly the market is rising. So, what do you need to look out for when getting onto the residential market? The first thing to decide is what type of place you are going to go for: a house or an apartment. Even then, there are a lot of different types of houses to choose from; semi-detatched, terraced, a bungalow etc. The best thing to do is to take into account your location and what the average buyer in that place will be looking for. If you are based in an inner-city business district that is crawling with high powered business people, they are probably not looking for a quaint little home in the country. Instead, they will be looking for a functional and stylish centralized pad – probably in an apartment block, for safety and convenience’s sake. If you are in a position to purchase multiple properties for rent at once, you may also want to consider investing in a condominium, where you can capitalize on the fact that a lot of people will be vying for a spot in your building. However, it isn’t always as simple as buying the property, renting it and forgetting about it. When you start to rent it out you will become the landlord, so it is up to you to deal with any tenant issues or complaints that come your way. For this reason you need to be a bit of a people person who is willing to help out even at the last minute. If this doesn’t sound like you, residential real estate might not be the best option!
Agricultural real estate
Buying farmland may not offer the best financial return on the market these days, but it is a real estate sector that is rapidly gaining ground among investors. Why? Well, like commercial property, farmland is a pretty solid inflation hedge, due to it’s history of increasing at a rate quicker than inflation itself. It is also an investment with a pretty low risk and the potential of a high capital return, especially when compared to other investments like coal or gas. Providing your farmland is managed properly by someone with experience, it will be a totally renewable resource, meaning that you won’t have a time limit on which to make your investment worthwhile (like you would with an investment based on fossil fuels). You can also bet on the total return from your farmland being pretty high, even if it takes a while to get off the ground. In fact, historically farmland has often provided greater returns than things like stocks, bonds, and commercial property – all things thought to typically be the biggest earners when it comes to investing. That said, always vet your farming professional before you agree to lease them the land and buildings you have bought, as it will be their responsibility to keep the place ticking over – especially if you have no previous experience in farming yourself. Finally, the purchasing of farmland is an excellent way to help diversify your investment portfolio – something that may well come to benefit you greatly in the future. Of course, every investment comes with a certain degree of risk attached, no matter what you go for. So, do plenty of research before you put your money into such a huge investment .
