Real estate investing can be an incredible opportunity for any savvy investor who wants to stay away from the volatile stock market. Here is a quick overview of what to consider.
Commercial real estate generally refers to office, industrial, and retail, while multifamily and single-family units come under residential.
Real estate offers tremendous possible benefits for a smart investor, including income flow, tax benefits and long term appreciation.
But before getting into either office space or multifamily, you need to do your due diligence. Unless you are an expert or exceptionally experienced at this, make sure to have a buyer’s broker, aka tenant rep, on your side.
There are generally two types of residential buildings that you can purchase: a single-family and multifamily. The former means a single unit that can be rented out to a single tenant. On the other hand, multifamily properties can be anything from a duplex with two units to an apartment complex with tens or hundreds of units.
You may already know that single-family homes can be as low as $30,000 for an investor in some lower cost markets, but multifamily can be hundreds of thousands or millions of dollars. While the price tag might be higher on multifamily, getting loans for them is much easier. They are generally based upon the income flow of the property, rather than soley on the financial condition of the borrower.
If you aren’t the type to manage the rental properties yourself, then you will need to hire property management services. But if you have single units, hiring external services may reduce your monthly income significantly. Fortunately, multifamily allows you to easily employ property management services without worrying too much about the cost.
Diversifying a portfolio can be instrumental for every investor, which is why an opportunity with a higher income potential makes good sense.
An office space can be as small as a loft or as big as a skyscraper. The sky might literally be the limit on this one. Since these are workplaces, any company that rents from you will stay for at least a few years because they need to establish a location for their consumers or clients. In other words, office spaces offer long term income or, if you occuy the space, long term rental relief.
There are obviously two options here as well. You can either go for a single office space that can be occupied by your company or rented out to a single tenant, or go with a building with multiple units in whch youcan occupy a portion. Having more units can reduce the risks because your income is diversified. One vacancy will ususally not have a significant long term effect.
While office spaces are generally more expensive than multifamily or single-family units, you do get more freedom. As the owner, you will have more responsibilities to your tenants in residential units, such as maintenance and repairs. But with office space, the maintenance is usually easier.
To find out if buying office space to house your business is right for you, check out our lease vs Buy information with the details to consider before moving forward.
Of course this is just a brief overview of the alternatives and there are many more investment options in real estate. Find out more at Investopedia.