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Four Types of Real Estate Investments You Need to Know

Two Laguna Hills Investors Discussing a Project in Front of a City SkylineIf you are getting started investing in Laguna Hills rental real estate, you may have noticed that there are quite a few options out there. Rental property investors, in particular, have a lot of choices when it comes to property type, size, and function. If you’re not sure which type of rental property is right for you, start by understanding the four main types of real estate and the purpose of each one. Then narrow down your options until you find the type of rental real estate that fits your needs and goals.


Most new real estate investors considering a purchase, go for a residential rental property. Obviously, there may be a good reason for this: the residential real estate market is enormous! In 2020, it was valued at $33.6 trillion and still growing. By definition, residential real estate is purchased and occupied as a dwelling by owners or tenants.

Within this broad category of real estate, there are many different kinds of residential properties: townhomes, duplexes, multi-family buildings, single-family residences, and more. Thanks to lifestyle and renter demographic changes, single-family rental properties have been in high demand for years. This makes investing in single-family properties one of the most common options for new investors.


By contrast, commercial real estate is property used only as a workspace or to conduct a business or trade. As with residential properties, there are numerous diverse kinds of commercial properties. Office space, retailers, restaurants, hotels and resorts, and even healthcare facilities all fall under the category of commercial real estate.

There are lots of benefits of investing in commercial real estate, as it can be a very profitable option for some investors. However, the initial cost of a commercial property is likely to be much higher than a residential property, which can be a challenging hurdle for first-time investors to overcome.


Even though technically part of the commercial real estate category, industrial real estate is a unique kind of real estate often designated for use in very specific ways. Examples of industrial real estate include car manufacturers, storage and distribution centers, food processing centers, power plants, and research and development parks.

There are also three different classes of industrial real estate – A, B, and C – so it is important to do your research if you are thinking about investing. Leases on industrial properties can be very lucrative and tend to be very long-term holdings. And, like commercial real estate, it can be awfully expensive to buy industrial property, particularly if such properties are in high demand.


The fourth and final type of investment property you need to know about is land investment. In most circumstances, raw or vacant land is purchased with an intent to develop it in some way or to use the natural resources on or under the land for profit.

For most investors who own land, this would include extending leases that allow tenants to harvest minerals or water, oil or mining, timberland, orchards, or to use as farms, ranches, and recreational activities. Purchasing raw land, in particular, is a highly speculative investment that carries an equally high degree of risk. But in the right circumstances, leasing land can be a beneficial project for a real estate investor.

With so many different options available, most real estate investors will specialize in one type or sub-category of real estate. This can be particularly effective when you are just starting since it takes time to learn everything you need to know about investing in each type of real estate.


If you are willing to start investing in residential rental properties, we can help! Our local Laguna Hills property management experts work with investors like you to help find, prep, and lease quality residential rental homes. Contact us today to learn more.

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