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Four Types of Real Estate Investments You Need to Know

Two Salem Investors Discussing a Project in Front of a City SkylineIf you are just starting in the area of investing in Salem rental real estate, you might have noticed that there are several options out there. Rental property investors, in particular, have a number of choices when it comes to property type, size, and function. If you’re uncertain about 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 restrict your options until you recognize the style of rental real estate that fits your needs and goals.


Most new real estate investors anticipating a purchase pick a residential rental property. Of course, there may be a good reason for this choice: 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 bought 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 others. Thanks to lifestyle and renter demographic changes, single-family rental properties have experienced high demand over the years. This makes investing in single-family properties one of the most popular options for new investors.


On the other hand, 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 many advantages of investing in commercial real estate, as it can be a very profitable option for some investors. Nevertheless, the initial cost of a commercial property could be a problem, as they are likely to be much higher than a residential property. This can prove to be a hurdle for many first-time investors.


Even if it’s technically part of the commercial real estate category, industrial real estate is a unique kind of real estate– often selected 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’s crucial to do your research if you’re thinking about investing. Leases on industrial properties can be very lucrative and tend to be extremely long-term holdings. And, like commercial real estate, it can be quite expensive to purchase industrial property, especially if such properties are in high demand.


The fourth and final type of investment property you should know about is land investment. In most cases, raw or vacant land is bought with the 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 getting into lease agreements 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 speculative investment that carries with it an enormous amount of risk. But in the right circumstances, leasing land can be quite lucrative for a real estate investor.

With so many different choices one can make, 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 want to begin investing in residential rental properties, we can help! Our local Salem 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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