Introduction

In the fascinating world of the real estate market, we come across a diversity of properties and categories that play unique roles. However, it is important to distinguish between the terms “types of property” and “kinds of property”, as they have different meanings and should not be treated as synonyms. Differentiating between them is essential to understand the changing and multifaceted nature of this sector.

First of all, “property classes” refer to the essential characteristics that define a real estate investment. These classes, called Class A, B and C, were created by real estate experts, lenders and agents to establish a quick and effective way to evaluate the quality and potential value of a property. However, it is important to note that these categories are not governed by fixed guidelines, and sometimes there may be discrepancies over the exact classification of an asset.

On the other hand, “property types” encompass the very nature of real estate, and this is where the true diversity of the market unfolds. In California, the distinction focuses on two main categories: residential properties and commercial properties. Below, we explore in detail the different facets of both categories.

Investment in Residential Properties

Residential properties are the refuges where daily life unfolds. These include single-family homes, townhouses, condominiums and vacation homes. When a residential property is not occupied by its owner and is used for profit, either through rentals or appreciation in value, it becomes an investment.

The range of residential property types is wide and exciting. Below is a detailed look at the various categories that make up the residential real estate asset class.

• Single Family Houses (Single-family homes): Designed to accommodate a family, these properties provide privacy by not sharing walls or common areas with neighbors. Some may belong to homeowners associations (HOAs) that provide access to amenities like pools and tennis courts.
• Cooperatives (Co-ops): Also known as housing cooperatives, these properties involve purchasing shares in a corporation that owns the building. Homeowners do not have a traditional mortgage, but rather take out a stock loan. Cooperatives usually have maintenance fees.
• Condominiums (Condominiums): Unlike co-ops, condos are individually owned properties with shared access to common areas. Association fees go toward maintenance and improvements to these areas.
• Terraced houses (Townhouses): Sharing walls with neighboring units, townhomes offer a single-family experience with access to common neighborhood spaces.
• Multifamily Properties (Multi-family properties): They include duplexes and other structures with multiple housing units. If a property has more than four units, it is classified as commercial. These properties are attractive to banks as they generate income from multiple tenants.
• Holiday homes: These second homes, such as beach houses or ski cabins, can be rented when not in use. Financing is usually more expensive than for a primary residence.

Investment in Commercial Properties

The commercial property segment focuses on income-generating assets. Let's explore the various types that make up this exciting category in California.

• Multi-family Properties: Here, we are referring to buildings with more than one rental unit. If a building houses four or more housing units, it is considered a commercial property. Property types range from townhouses to apartments and condominiums.
• Commercial Space (Retail): From shopping centers to freestanding buildings that house restaurants or gas stations, commercial space is varied. Malls with multiple stores often attract investors due to the diversity of tenants.
• Commercial offices (Offices): From single-tenant buildings to multi-tenant skyscrapers, commercial office properties vary in location and condition.
• Personal Storage (Self-storage): These facilities rent storage space to monthly or long-term tenants. Spaces range from lockers to areas for containers and RVs.
• Hotels: These establishments can adjust rates according to market demand. Investment options include the acquisition of the hotel, collective real estate funds or shares of hotel operators.
• Mobile Home Parks (Mobile homes): By leasing land to mobile home residents, this investment is low maintenance. The cap rate is usually high due to the stability and cost of moving.
• Land: The land is divided into greenfield (undeveloped) and brownfield (previously developed), each with its own considerations.
• Industrial Properties: Whether manufacturing, warehousing and distribution or flexible spaces, industrial properties offer stable and diverse opportunities.

Real estate investing in California is a journey full of opportunities and challenges. By understanding the wide variety of properties and classes, investors can make informed decisions and diversify their portfolios for greater return potential in this exciting field.