A Guide to Real Estate Asset Classes: Property Type and Property Classes - HBRE (2024)

Investing in real estate can provide you with a variety of benefits, such as diversifying your portfolio,generating a steady stream of income, and protecting your money from inflation. However, before you begin investing, it is important to learn more about the difference between property types and asset classes. This will allow you to explore other sectors, such as medical office real estate, and achieve your financial goals. Whether you are a new investor or you are simply looking to learn more about real estate asset classes, this guide will provide you with key information to make the most of your investments.

Real Estate Asset Classes

An asset class is a group of investments with similar characteristics that follow the same rules and regulations. Some examples include stocks, bonds, or money market accounts. Real estate is an asset class that belongs to a larger umbrella called alternative assets, along with marine finance, art finance, cryptocurrency, and private equity. Real estate is one of the most popular alternative investments, especially for investors looking for long-term, stable investments. When it comes to the real estate industry, the asset class breaks down into property types and property classes.

Property Types

Within real estate, there are two main property types: residential and commercial real estate. Residential real estate is considered to be an investment if the property is owned for financial gain and is not occupied by the owner. There are many property types to consider, such as single-family homes, condos, vacation houses, and townhouses. In comparison, commercial properties are designed with the aim of generating income. Commercial real estate includes multi-family properties, office spaces, retail, self-storage, hotels, mobile homes, and land investments. In addition, healthcare real estate includes hospital campuses, office buildings, medical offices, and retail medical facilities.

Property Classes

There are three types of property classes, which include classes A, B, and C. They were introduced as a means of communication for brokers, real estate investors, and lenders to quickly determine the quality of a property. Class A properties are typically defined as the highest real estate class with premier locations and high-end amenities. Class B properties tend to be a bit older than Class A and aren’t always maintained to a professional level. Finally, Class C properties are the oldest properties (usually older than 30 years) that are in need of more significant improvements or renovations than Class A or B, making them a more risky investment.

Real Estate Investments

Investing in commercial real estate, specifically healthcare real estate, can be a strong, stable option for investors to consider when looking for ways to achieve their investment goals. Real estate asset classes can be a good indicator of a property’s potential and overall cost. Each asset class presents investors with different opportunities and rewards but also has its risks. Therefore, it is crucial to do plenty of research before investing.

About HBRE

Headquartered in Nashville, Tennessee, HBRE is a full-service commercial real estate firm specializing in healthcare real estate. With over 50 years of combined industry experience serving 28 states across the U.S., we deliver exclusive healthcare solutions so you can provide the best patient care.

If you have any questions about leasing, buying, or selling a commercial property in Nashville or beyond, connect with our team today.