The 10 Types of Real Estate for Investment or Syndication
by Christopher Levarek
“If you can, you should, and if you’re brave enough to start, you will.”
- Stephen King
As a multifamily investment firm, we focus primarily on, you guessed it, Multifamily or Apartment complexes. However, there are numerous asset types out there to be aware of and compare. At Valkere Investment Group, we like multifamily due to current market indicators, recession-resistance factors and the strong demand at present.
The varying other types of asset classes will have a variety of advantages and disadvantages depending on timing of the market, location and experience. Let’s dive into the varying property types and reasons an investor might consider such property types.
Property Type : Single Family
The most commonly understood property type is the “Single Family”, or house/home. Understandably since most people own or will own a home, this one is generally well-understood by aspiring or current real estate investors. Typically this is the entry point into real estate investing for many as the familiarity with a house or home presents security for the investor in all the areas of financing, renovating and renting.
Property Type : Multifamily
Multifamily property types are simply those that hold multiple “doors” or separated living spaces which each have their own rent due each month. Examples of multifamily properties can range from a “small multifamily” property such as a Duplex with two doors to a “Large Multifamily” property such as an apartment with 120 doors.
Often Single Family investors will move into this space in order to take advantage of economies of scale such as repairs/expenses all located under one roof as well as the benefits around limiting risk of loss of income due to non-payment from a tenant. Large Multifamily or, multifamily greater than 4 doors, are highly common in syndications as these properties represent easy to understand business models, significant tax benefits and diversified risk for investors.
Property Type : Retail
This property type represents the commercial space of strip centers, large shopping malls, single-tenant stores and more. A variety of goods/services are offered in the retail space to include department stores, grocery stores, nail salons, restaurants, mom & pop stores, etc.
In this sector, it is good to be aware of the shift from physical to online purchases occurring which is and will represent some volatility in the market. It is safe to say however that certain services in the retail space such as laundry, nail salons or barbershops are not going anywhere anytime soon.
Property Type : Office
As it sounds, this asset type involves office space ranging from single-tenant offices all the way to large high-rise or skyscraper buildings. The properties can hold just one tenant, be made up of number of tenants under one building or even a small complex of buildings.
The shift from working in the office to remote work-at-home represents changes in this space and possible room for opportunity to use such properties in other sectors.
Property Type : Self-Storage
Self-storage represents a common need for the average consumer and thus will be generally known by many. As people are moving from place to place, these rentable storage spaces become short or long term locations for additional personal possessions. Businesses also utilize these property types as expansion occurs and items must be stored in a separate location then the office.
These property types are often utilized throughout economy ups/downs. In the ups or expansion, extra purchases require additional storage options for consumers/businesses while in the downs or contractions, downsizing/moving or cutting costs initiatives require storage as well.
Property Type : Hospitality
Hospitality can range from a variety of small to large hotels and resorts. Whether a small mom & pop motel or a large well-known branded hotel, this sector is dependent on tourism and travel.
With this being the case, depending on the location and current economy, there can be some volatility in demand. However, for the right operator, these properties can be very lucrative and hold great opportunity.
Property Type : Mobile-Home Park
These property types typically have a tenant base which tend to stay with the property for long periods of time. This represents less turnover and thus these properties can be highly recession-resistant during economy lulls or downturns. Typical mobile-home park owners look for a balance of tenant-owned units versus park-owned units as this ensures the expenses and maintenance costs are absorbed by owning tenants.
Items to be aware of when purchasing mobile-home parks typically focus on things such as the number of park-owned units, private vs public utility structures, water/sewage build types, etc.
Property Type : Land
As it implies, this sector revolves around purchasing land or non-developed areas with the goal of developing or building for revenue generating other asset types. Raw land is valued by the potential or value of whatever can be built upon it. As this the case, this property type is highly dependent on markets, governments, federal & state policy and more.
An opportunity or highly valued piece of land could quickly lose it’s value due a significant change in federal/state policy or recent development or incident nearby. However, there is great opportunity in land and many have had great success in this sector as well.
Property Type : Industrial
This category relates to warehouses, distribution centers, manufacturing and more. As consumers shift to purchasing more product online, there is a shift from the retail space to the industrial space for demand. More property is needed to hold goods needing to be shipped online as well as significantly more distribution centers are needed today in well-located in key areas to meet this new demand in a timely manner, ex. Think “Amazon Over-night Delivery”.
Property Type : Specialty
Specialty properties are the “all other types” not addressed in the above categories or properties to include boat marinas, airports, stadiums, parking lots, hospitals, etc. Understanding the demand in the location for these specialty properties becomes key as well as the unique regulations or requirements associated with each.
Like anything that is unique, these can hold great opportunity as it takes a significant amount of knowledge or experience to succeed thus making these properties not as commonly competitive by the mainstream investor or operator.
In Final
Understanding and selecting the right sector for investment is key to success. Whether investing passively or actively running the project, performing due diligence and educating on the sector should be priority before taking action. Many books have been written on each of these sectors and we encourage the reader to explore the many resources on the selected sector. Invest Smart!