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A Guide to Different Types of Real Estate Investments

Posted by Justin Havre on Monday, November 12th, 2018 at 8:40am.

Choosing the Best Real Estate Investment OptionIt can be hard to decide which type of real estate to include within a portfolio mix. Those not familiar with investing in real estate may want to understand more about this important way to enjoy additional cash flow and tax benefits.

Wondering how to start investing in real estate? Is real estate a good investment? Learn more about the different types of real estate investments and other important considerations below.

Use Real Estate Investment to Enhance a Portfolio

What is real estate investment? In addition to stocks, savings and equity in a home, Canadian investors may want to look into investing into other forms of real estate. Some investors get into non-residential real estate in order to have a hard asset that is tangible and to benefit from a monthly income from a source that they may control. A TD Bank survey showed that four of every 10 investors state that they consistently see a financial benefit when investing into real estate. When considering investments, respondents of the TD Investor Insights Index noted that real estate was an area participants were highly confident in investing in. Many financial experts still suggest that investors add real estate into their portfolios for a diversified portfolio.

There are different types of real estate an individual may want to invest in. Some may choose to go with multi-family building. Investing in this type of property allows the owner to receive regular monthly payments and payment should increase over the long-term. Another option may be commercial properties. Such properties may involve fewer tenants, who often sign up for long-term leases to secure the best rates. This can offer regular payments and professional relationships for investors.

Either of these options may require a significant amount of money to purchase a property. Investors may want to work with partners in a limited partnership or joint venture in order to make it easier to invest in such properties. In this way, an investor may decrease their risk and be able to take advantage of more investment opportunities. However, it may be more difficult to sell if others want to continue with a particular investment.

Categories of Real Estate Investments

Canadian investors may want to invest in one or more categories of property. There are a few types of real estate investments to consider when thinking of diversifying one's portfolio.

Residential Real Estate

Residential real estate offers housing to individuals and may be a single-family or multi-family unit. Tenants often sign a 12 month lease and investors can change tenants or increase rents rather quickly at the end of a lease. This can prove more difficult for investors dealing with tenants with long-term leases. Location is also an important consideration, both for residential and retail real estate.

Commercial Real Estate

Office buildings fall into the category of commercial real estate and investors may appreciate the fact that tenants generally sign on for long term leases. Investors who want a consistent cash flow and to deal with business professionals may want to look further into this type of real estate investment.

Industrial Real Estate

Similar to commercial real estate, long term leases may be available when it comes to industrial real estate. Properties may include storage unities, manufacturing facilities, assembly plants, warehouses and distribution centers.

Retail Real Estate

Those that want to potential snap up a percentage of the sales from retail store tenants may want to pursue retail real estate. Properties can include traditional malls, shopping centers and strip malls. Landlords may take an active interest in making improvement to make retail properties more attractive to potential shoppers.

Mixed-use Real Estate

Investors may choose a mixed-use real estate property which allows one to take advantage of the benefits of different types of real estate. Such an investor may have retail, commercial and residential tenants in a single building.

Real estate investors generally take steps to protect their personal assets through creating a legal entity and making real estate investments through the entity. Two options include a limited liability company or limited partnership.

Using Real Estate Investment to Diversify Your Portfolio

When it comes to bolstering the look of your portfolio, few things impress more than solid real estate holdings. They don't take the place of stocks, bonds, and equity, but real estate can provide protection in case of a market crash. While no investment is free from risk, financial planners and investors alike view real estate holdings as a plus. 

Demand elasticity refers to the fluctuation of demand in the public sector. And while property prices may rise and fall, they're not typically as volatile as other assets. When inflation occurs, real estate owners tend to pass this cost on to their clients (through raising rents) rather than paying for it on their own. When clients sign a year-long lease, you're essentially guarding yourself against the market. The more real estate you own, the more stable your income will be, making you a more attractive investor to all. 

Buying real estate may seem like a big step, but it's also one that all serious investors need to consider to maximize their total assets. Whether it's commercial, residential, or a REIT, learning more is the first step toward a better portfolio. 

Many Paths to Real Estate Investment

There are many paths to expanding your real estate portfolio. Real estate investors may choose to invest in or manage one or more of the types of properties above. Others may want to have more regulatory rigor applied to any real estate investment. In this case, they may want to look into a REIT. REITs can be bought and sold easily and are professionally managed. Different types of real estate properties may be available through a REIT. MICs are another form of real estate investment that involves short-term mortgages on residential and commercial properties.

As one can see, there are many ways to get into real estate investment. Those that like to be hands-on with their investment may want to pursue owning and managing their own North Calgary real estate and have opportunities to generate ancillary income in commercial, residential and retail properties. Despite the risks involves, many still choose to invest in real estate.

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