The Lefebvre Team

Experts in Multifamily & Commercial Real Estate

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#InvestingTipTuesday: Investing In Other Classes of Real Estate

Hello everyone!

Today I want to talk about investing in different types of asset classes. A lot of what we've talked about in our #InvestingTipTuesday series both on social media, and here on the blog, has been relating to multifamily investment, but I wanted to bring up the different types of investments you can get into, because multifamily is not the only asset class you can invest in.

Multifamily is a very easy thing to get into because typically, you can start with a very, very small building such as a duplex which has a much lower barrier to entry than a retail strip mall or something like that, but there are different options out there. You can have retail investments, you can have mixed-use properties, or you can have office buildings and industrial properties. There are a lot of different types of investments, and as such, you should look at the pros and cons of each of them. 

When it comes to investing in multifamily, they can be a lot more to manage and it's typically a little more resource intensive. You have shorter term leases because tenants will sign for no more than 12 months, and you do tend to have more turnover in that type of business. However, on the plus side, you can have a much quicker-filled vacant unit, because everybody needs a place to live, and particularly in the northeast, vacancy rates are very, very low. 

On the flip side, you can look at something like retail. With retail types of investments, you can have tenants that will sign long-term leases such as three, five, or ten year leases, and depending on the type of tenant that you rent to, you could have a very, very low risk. For example, if you rent to a Starbucks, you're probably not going to be able to charge them as much in rent, but you can be sure that they're going to be paying back their lease unless their entire company goes bankrupt, which is very, very unlikely. However, if you're renting to a mom-and-pop local tenant (for this example, we'll call it ABC Coffee Company), that's going to be a little bit riskier, so there might be a higher rent associated with that. 

There's a lot of different pros and cons to each type of real estate investing, and all that should be taken into consideration. At the time of writing this, one of our retail units has been vacant for a few months, but extended vacancies are common in the retail world. Think about that when you're looking into investing in different asset classes. Understand the pros and cons of each, and understand that each different type of property has a whole lot of different ways that you need to manage it and how you invest in it. 

Best,

Matt Lefebvre

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