When it comes to investing in real estate, what is the first thing that comes to your mind? The likelihood of you saying your home is high. One of the most popular investment mediums, real estate investment is more than just buying and owning a property. There are a variety of real estate investments that you can add to your investment portfolio.
Real estate investments can be divided into five categories: residential, commercial, industrial, mixed-use and real estate investment trusts (REITs).
Residential Real Estate Investment
This is the most traditional and common form of real estate investment. It includes properties such as houses, apartments, vacation houses that have been acquired with the intention to earn a profit on the property investment either through resale of the purchased property (known as flipping) or through rental income. Some investors adopt a buy-and-hold strategy — purchasing a property at a low price, then hold on to it until the property price appreciate before selling it at a profit. Investors can earn a stable passive income by leasing the property while holding on to the
Commercial Real Estate Investment
Commercial real estate investment refers to developing or acquiring a property (e.g. an office building or a retail mall) and leasing the units to companies and small business owners for a period of time in order to generate rental income. Commercial real estate is categorized into three classes: class A, class B or class C, where class A buildings are the best in terms of infrastructure, aesthetics and location. The difference between residential and commercial real estate leasing is that the former is either quoted an annual sum or monthly rent whereas the latter is typically quoted an annual sum per square foot.
Industrial Real Estate Investment
The industrial real estate market is a good option for investors who are looking to diversify their investment portfolios. Acquiring industrial properties such as factories and warehouses can yield substantial returns in the long run either via monthly rentals from tenants or profit from capital appreciation. Some factors to consider when investing industrial real estate are: location, proximity to customers and transportation.
Mixed-Use Real Estate Investment
Other than the three types of real estate investments discussed above, there is another category of real estate investment that combines both residential and commercial businesses within the same property, known as mixed-use real estate investment. A mixed-use development may comprises office towers, convention centre, hotel, retail and F&B establishments. Investing in mixed-use properties typically generate higher revenue and valuation in the long run as compared to single property.
Real estate investment trusts (REITs)
If you do not wish to handle the properties yourself, you can opt to invest in real estate through real estate investment trusts (REITs). When you invest through REIT, you are buying shares of a company that owns real estate properties. In return, you will get back dividends.
In A Nutshell
Different types of real estate investments will perform and generate varying returns. Thus, you will need to consider which type of real estate investment fits your investment plan and allocation of funds before you invest.
All information in this article is correct to the best of our knowledge and belief at the time at which the article was originally published.
This article was written in the author’s personal capacity. Any opinion expressed in this article are the author’s own and
do not reflect the view of Vivaz Capital Pte Ltd.
Vivaz Capital, a subsidiary of Vivaz Group Holdings Pte Ltd, is a private marketing and consultancy firm, headquartered in Singapore.
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