For those looking to invest in real estate or simply learn more about the industry, understanding the four basic classifications will prove to be useful. Each type of real estate serves a function, and while properties can be rezoned to suit different types, there are a number of factors that contribute to the initial classification.

Residential

Containing new homes, resale homes, apartment complexes, condominiums, vacation homes, luxury homes, and more, residential real estate is often the most common type in real estate investing. Real estate agents, homeowners, renters, and house-flippers all work within this type of real estate. 

Commercial

All businesses are contained within commercial real estate. From hotels and offices to schools, shopping malls, and medical facilities, all operations that are for-profit can be considered commercial real estate. In some cases, apartment complexes are considered commercial properties because they are operated as a means to drive cash flow, even though they are used as residences. There is overlap between these categories, but the primary function of a given property is typically used to determine its classification.

Industrial

Industrial properties are buildings that manufacture, produce, research, or distribute goods. It is important to note that a building that distributes items may be considered commercial real estate, and the nature of the distribution process influences the building’s classification. The industrial real estate classification is one of the most important distinctions as the zoning requirements and other restrictions for industrial properties are significantly different from the other types.

Land

This kind of real estate arguably has the most potential. Land can be found practically anywhere; it can come in the form of vacant lots, ranches, farms, and undeveloped plots. Developers can choose to build residential, commercial, or industrial buildings on undeveloped or vacant lots, but there are limitations as to what can be built depending on the lot’s surroundings.

Choosing to invest in real estate or simply become more knowledgeable about the industry is a worthwhile endeavor. Beginning with a basic understanding of these four types of real estate will help you better determine the advantages of investments or project involvements as opportunities arise.