Types of Real Estate Investments

From vacation rentals to REITs to BRRR-method single-family home investments to crowdfunding platforms, there are many types of real estate investments to explore.

What types of real estate investments have been most intriguing for individual accredited investors in 2024? What types of real estate investments are in focus for 2024 and beyond? We are in new territory, with fluid capital markets and. Despite broad-based economic health, public markets are volatile. In this period of dislocation, new types of real estate investments come to the fore. You may already be familiar with physical real estate classes like residential, commercial and industrial properties, but less traditional portfolio additions can also serve as a means to generate cash flow.

As market conditions become increasingly volatile, private real estate ventures also serve as an illiquid alternative to other investment portfolio structures. Now is a great time to consider which type of real estate investment is right for you.

Let’s dip into these need-to-know types of real estate investments for 2024 and beyond.

1. Multifamily Investments

Multifamily investing is the largest commercial real estate sector. While all commercial real estate brings tangible value, multifamily is the most essential of all assets. This is part of the reason that multifamily is historically less volatile, more recession-resistant, and a better hedge against inflation than many other CRE asset classes. In today’s environment, a few durable trends bolster this type of real estate investment:

• Houses are enormously expensive, pushing more would-be buyers into the multifamily market
• While supply pipelines were relatively strong up until rates began to rise in 2022, higher development costs and cost of capital have caused the supply pipeline to thin for coming years. (In other words, there is a severe supply/demand imbalance, creating more opportunity for multifamily operators.)
• While inflation has abetted some, it is likely to remain elevated for some time. Due to high lease turnover, multifamily operators can better “capture” inflation than with other asset classes.

With fintech-based investing options like EquityMultiple, you can potentially tap into this type of real estate investment at a lower barrier to entry and diversify across multifamily assets.

Let’s take a moment to talk about the other side of the coin: single-family houses. Houses have never been more expensive. Owning even one single-family home often involves active management, and now may not be the time to take on your own flipping project. That said, the “build to rent” model has gained steam in recent years. With huge institutional investors more on the sidelines in today’s environment, SFR and “build-to-rent” could still be viable in the middle market where EquityMultiple operators. You can learn more in this article.

While multifamily is the most timely of the residential CRE asset classes, “build to rent” may also offer timely opportunities given the shifting preferences of millennials, a large and influential renter demographic.

2. Commercial Real Estate Debt Funds

One of the most timely types of real estate investments for today’s market, real estate debt funds potentially offer built-in diversification, downside protection, and appealing yield.

A debt fund targets diversified debt positions in real estate assets, typically bringing investors a flat rate of return or coupon for their investment. Generally speaking, private debt funds will be less liquid than a publicly traded REIT (such as a mortgage REIT) but can offer distributions, reinvestment programs (DRIPs) or relatively strong liquidity versus other private-market real estate investments (like equity investments, which may have a more speculative timeline).

Debt investing potentially offers a strong thesis in today’s market due to increased rates and balance sheet tightening by regional and midsize banks, as well as CMBS — the types of debt capital sources that traditional serve middle-market real estate operators. Lenders, such as private debt funds, can issue loans to higher-quality borrowers at more conservative leverage due to the reduced supply of debt capital in the market and higher prevailing rates.

EquityMultiple’s Ascent Income Fund is a real estate debt fund launched in mid-2023, that seeks to capitalize on this market opportunity. The Fund invests through a REIT and so offers REIT tax benefits in addition to attractive target yield and diversification.

3. Short-Term Notes

Among all types of real estate investments, short-term notes are arguably the most accessible. Short-term notes are, well, short in duration. Generally these investments offer a yield or flat rate of return and serve a treasury function, similar to a corporate bond. EquityMultiple’s Alpine Notes are short-term note investments that offer the following benefits:

• They are backed by real estate
• They carry zero fees to investors
• They are offered in 3, 6, or 9 month maturities to facilitate flexible cash management
• Capital can be reinvested into the next series of Note or reallocated to a different EquityMultiple investment as soon as 30 days from close of the Note investment
• Investment minimum of just $5k

In todays market, with flexibility needed to make timely investments, short-term notes could be one of the more appealing types of real estate investment.

4. Distressed Asset Investments

Volatility in capital markets has also created financing risk for operators of various CRE assets. Operators who expected to refinance at the lower rates of yore may now be forced to liquidate. Other operators may have assumed floating-rate debt and are now unable to service debt obligations, forcing sale. Strong economic fundamentals, combined with a challenging capital market, creates the opportunity for distressed asset investments.

This is one of the most opportunistic types of real estate investment. These “once in a cycle” opportunities generally bring greater risk but high return potential.

5. Industrial Real Estate

Industrial real estate is one of the “core four” real estate asset classes. While traditional office has been hard by the “work from home” trend and the lasting impact of COVID, Industrial has benefitted for almost opposite reasons. As e-commerce captures more share of consumer activity, demand has grown for industrial space for warehouses, logistics, and “last-mile fulfillment” centers. The geographic flattening of the “knowledge economy” and ascent of Tier II metros like Phoenix, Raleigh and Austin means that larger, more affluent consumer bases have spread the general demand for e-commerce-ready industrial space across a larger swath of the U.S. 

The on-shoring of supply chains, policy emphasis on domestic industrial policy, and public sector buoying of green infrastructure may all drive up demand for industrial space in years to come. Generally speak, industrial offers some other unique advantages:

• Because tenants usually have complex needs (like delivery bays, clearance heights, or climate control) there can be barriers to entry for industrial operators, constricting supply.
• Because tenants are usually locked into long-term leases and have complex operations on-site, these assets can be somewhat insulated from tenant risk.

Other niche concepts in industrial, like cannabis real estate, may also offer an interesting forward-looking investment thesis. Investing through a platform like EquityMultiple allows individual investors to tap into larger commercial real estate opportunities, like industrial, that bring a higher level of complexity and capital requirements.

6. Mixed-Use Spaces

Mixed-use lots offer dynamic working, living, or retail environments for a broad range of residential and commercial tenants. They can be a cheaper alternative for corporate tenants seeking large offices, warehouses, or manufacturing space.

The societal shifts accelerated by COVID changed how people interact with the built environment. This, and the rise in interest rates, have shifted the calculus on what types of business plans make for viable real estate investments. For example, the “urbanization of the suburbs” continues, with a range of demographics seeking urban amenities alongside more space and lower cost of living. This creates opportunity for developers and investors to pursue hybrid retail, co-working, and living spaces. Flexible property designs also add some potential downside protection; mixed-use developments in areas with non-restricting zoning and building covenants allow operators to adapt to tenant preferences over time.

7. Raw Land

Raw land investments can be practical portfolio adds for investors who want full control over the development of their assets. Land can be subdivided, held or developed into other types of real estate. Owning land, however, can provide more than just a way to generate cash flow. 

Some investors earn a profit by holding a piece of land that goes up in market value. Other investors subdivide large lots and sell the smaller sections at a premium. With the right permits, raw land investments can be transformed into commercial or residential rental units.  These investments offer no cash flow and a highly speculative timeframe for harvesting returns. So land investments are not for everyone. They are the simplest in terms of maintenance and most flexible in terms of exit, however. In today’s market, where the next phase of the business cycle remains uncertain, this type of “wait and see” investment thesis holds some appeal.

8. Hotels

Hotels are typically the first CRE asset class to suffer during a recession. The COVID lockdown period hit hotels particularly hard, dropping room occupancy to close to zero in most parts of the country.

Hotel occupancy rates have all but rebounded from the pandemic. In fact, many hotel patrons are still indulging in “revenge travel” — making up for lost time and seeing new parts of the country, to the benefit of hotel operators. While room occupancy and RevPAR have rebounded, valuations for hotel assets remains suppressed in many markets, especially with rising interest rates. This could create opportunity for forward-looking investors.

There are multiple hotel tiers that comprise this type of commercial real estate:

• Full-service: This type of hotel boasts amenities that guests will pay extra for. They must be well maintained to attract the target demographic.
• Limited-service: Basic amenities like a pool and fitness room are provided for guests’ enjoyment. This tier also hosts economy and business express hotels.
• Budget: For an affordable price, this tier might not offer any additional amenities to its guests besides what’s included in their room or parking spot.
• Extended stay: This tier caters to long-term guests who require access to everyday amenities like a full kitchen and in-house laundry facilities. 

Local crackdowns on AirBNB operators could also create upward demand pressure for hotel stays in the years to come.

9. Health Care Facilities

In our ever-changing world, medical office buildings (MOBs) are just as valuable as grocery stores, gas stations and other essential assets. This commercial office asset class has experienced exponential growth in recent years, and health care facilities are projected to keep growing in value. 

Owners of MOBs can expect to attract tenants capable of long-term lease agreements. This asset class is highly recession-resistant; while a downturn hurts consumer confidence, demand for medical care tends to stay constant. What’s more, America’s population is aging, and healthcare patrons are increasingly gravitating to non-hospital care. While telehealth has grown in stature, many types of medical care require in-person visits. 

Here are a few different types of practices that could potentially rent your medical office building:

• Veterinary clinic
• 24-hour urgent care
• Primary care physician’s office
• Physical therapy clinic
• Cosmetic surgery centers

Health care facilities are finding their way into strip malls and other retail venues that have heavy foot traffic. MOBs that cater to families can be a great addition to a suburban shopping center in a local neighborhood. Medical office buildings can also encompass entire hospital complexes in the heart of a gateway market, making location choices abundant. 

10. Diversified Portfolios

Diversification is wise in any phase of the business cycle. Both diversification among asset classes and within asset classes is particularly important in times of volatility or capital market flux. It behooves self-directed investors to diversify among property types, across the capital stack, among markets, among operators, and between income-oriented and total return-oriented strategies.

EquityMultiple offers private fund structures, curated portfolios, and a steady flow of diversified single-asset opportunities. With low minimums, a streamlined investing process, and a dedicated Investor Relations Team to aid your asset allocation, you may have found the right place to diversify among different types of real estate investments.

The Bottom Line

Understanding your investment goals will help you learn which types of real estate investments are right for you. 

Staying educated about the changing real estate landscape can expose you to innovative strategies and help you diversify your investment portfolio.

FAQs About Types of Real Estate Investments

Still have questions about real estate investments? We have answers.

What Are the Best Real Estate Investments for Beginner Investors?

Every investor is going to have access to a different amount of capital and resources. Your goals will decide if cash flow or value appreciation should take precedence. 

FIRE (Financial Independence, Retire Early) strategies might warrant cash flow investments like rental units, while nest egg strategies encourage you to hold an undeveloped piece of land as it appreciates in value.

If you are a beginner investor who’s itching to get your feet wet, consider house hacking as a tangible way to obtain rental income from existing real estate. This strategy allows you to generate cash flow and equity from your real estate. 

Do I Need a License To Invest in Commercial Real Estate?

In short, no, you do not need a license to invest in commercial real estate. Becoming a licensed real estate agent, however, can save you money in the long run.

If you plan on making real estate investments a large part of your portfolio or your new career, then becoming licensed can help you earn a commission on future real estate purchases.

Are Crowdfunding Platforms and Real Estate Investment Groups Trustworthy?

Any investment strategy that is relatively new has less market exposure and should be carefully studied. All technology-based investing is subject to SaaS limitations. 

Although some investment strategies have yet to experience significant market crashes, well-formulated exit strategies can help you expand your investment portfolio with confidence.

Consider working with an experienced real estate investment platform like EquityMultiple if you are interested in the potential of digital investment strategies for your portfolio.

Which Investment Property Types Require the Lowest Amount of Investment Capital?

In general, residential rental investments require a lower initial investment than industrial real estate or other types of commercial properties

Crowdfunding platforms, however, were created with low barriers of entry in mind. Investing in a crowdfunded property  can be a great option for investors who would like to invest in commercial real estate, but are not interested in the hands-on work of being a landlord themselves.