The thought of having assets are immensely comforting to the soul as it ensures a sense of financial security and they can also be a form of insurance. Real estates are a very profitable investment with returns that can appeal to almost any investor looking to generate good revenue and still enjoy the insurance of a physical asset. As a new investor, there are important things you need to know about the types of Real estate assets because they each have different benefits and need different considerations before being invested in. Life is a risk and so many enjoyable things in life come with risks and subsequently, such things tend to produce higher earnings. The same goes for Real estate and it’s assets. Understanding the types of assets and how to go about them can build you a fortune.
Before venturing into real estate, you need to know the types of real estate assets to choose from in which you can specialise on a particular category or deal with several at the same time. The basic types of real estate assets are:
RESIDENTIAL REAL ESTATE:
These structures are properties that individuals pay to live or reside in. They can be rented, leased or bought off the property owner. This is good for most investors who want to receive a consistent flow of profit while enjoying exclusive tax benefits that are associated with residential real estate ownership. However, the price of renting or leasing such real estate properties depend on certain factors that have to be properly strategised in order to keep the cash flowing steadily. Most of the ways of purchasing these properties could be buying and renovating an old property, buying off a seller that’s looking for emergency cash to settle bills, buying plenty at once and getting discounted prices, etc. An investor would want to find out what kind of property is suitable for the area, get to know the target market beforehand before sourcing out funds to purchase any property. Types of Residential Real estate include; Single-family house, vacation homes or serviced apartments, multifamily homes(duplex, triples, etc).
2. COMMERCIAL REAL ESTATE:
These are structures that are erected for commercial purposes. They can be office buildings, hotels and restaurants, hospitals, religious buildings, industrial buildings etc. One good benefit of commercial buildings is the fact that tenants usually lease such structures on a multi-year basis, which means more cash flow. For this reason, commercial tenants tend to occupy structures longer than residential tenants and the deal between tenant and property owner is stronger as the rent is mostly paid on time and the vacancy rate is low. It is also common for commercial tenants to be more self-reliant than residential tenants. That is, they take care of the structures by themselves without involving the property owner. The lease price fluctuates at certain periods due to certain market factors, and is favourable to either party, depending on the initial agreement. The competition here is less than in residential apartments as the risks and capital for purchasing such properties is high and this usually deters many investors despite the high-profit potential.
3. RAW LAND INVESTMENT:
This includes purchasing underdeveloped or vacant land and reselling later when the cost appreciates or developing the landed property into structures that generate good profit like residential and commercial structures. Knowing whether to hold or develop the land is very important to ensure maximum profit. In this investment, extensive knowledge of the market is required to identify a high growth market as this will increase the returns that such properties will yield. In Nigeria, most real estate assets start off from raw land investments. Another kind of investment that is similar to land purchasing is new construction. Though in this case, structures have already been erected. The important things to note when seeking the best property to purchase is location. Location is the key to knowing what kind of real estate assets to invest in as well as the target market.
APPRECIATING VERSUS DEPRECIATING ASSETS
The importance of knowing the difference between appreciating and depreciating assets can not be overemphasised if you’re looking to invest in anything at all.
Appreciating assets are assets with values that increase over time, producing income in one way or the other building wealth for you, whereas, depreciating assets are assets that reduce in value over time, although they may be a necessity.
TYPES OF APPRECIATING ASSETS
- Real estate.
- Landed Property.
TYPES OF DEPRECIATING ASSETS
- Phones and electronics.
Appreciating assets need to be purchased more than depreciating assets because the rate of appreciation tends to be less than the rate of depreciation of assets. Since the latter could be a necessity, there has to be a balance between the two as purchasing more depreciating than appreciating assets would reduce your wealth building. In extreme cases, you could even lose your wealth.