What Are the 4 Types of Real Estate? A Clear Guide for San Jose Investors

Real estate isn’t one-size-fits-all. From single-family homes in Evergreen (95123) to developable land near Coyote Valley, investors choose among four core property types.

Understanding residential, commercial, industrial, and land real estate helps you pick the right strategy—whether you seek rental income, capital gains, or long-term development. This guide breaks down each category, provides San Jose–specific examples, and suggests how to get started in each sector.

1. Residential Real Estate

1.1 Definition & Subtypes

Residential real estate includes properties where people live:

• Single-Family Homes: Detached houses on their own lots (e.g., a 3-bed ranch in Silver Creek).

• Multi-Family Units: Duplexes, triplexes, four-plexes, small apartment buildings (e.g., a 4-unit building near Downtown SJ).

• Condominiums & Townhomes: Attached units in managed communities (e.g., condos in Cambrian Park).

1.2 Why Invest in Residential?

• High Demand: Families and individuals always need housing.

• ADU Opportunities: Many Evergreen and Cambrian lots allow an ADU, boosting rental income by $2,000–$2,500/month.

• Buyer Programs: First-time investor loans and CalHFA grants help you secure down-payment assistance.

1.3 Key Metrics to Track

• Median Home Price: $1.45M citywide; Evergreen at $1.48M.

• Average Rent: $4,600 for 3-bed homes, $3,800 for 2-bed condos.

• Days on Market (DOM): 13 days in strong suburbs; condos take ~18 days.

Get Started: Identify a neighborhood with rental rate growth outpacing price growth—Evergreen’s strong school district makes it a prime residential market.

2. Commercial Real Estate

2.1 Definition & Subtypes

Commercial real estate covers income-producing properties used for business:

• Office Buildings: From standalone professional suites to large campuses (e.g., Almaden Valley office park).

• Retail Spaces: Shopping centers, storefronts on The Alameda in Willow Glen.

• Mixed-Use Developments: Ground-floor retail with apartments above—a growing trend near Diridon Station.

2.2 Why Invest in Commercial?

• Longer Leases: 5–10 years common, providing income stability.

• Triple-Net (NNN) Leases: Tenants pay taxes, insurance, and maintenance, reducing landlord expenses.

• High Returns: Cap rates often 5–7% in San Jose’s prime corridors.

2.3 Key Metrics to Track

• Cap Rate: Annual net operating income ÷ property price—e.g., 5.5% for Almaden office space.

• Occupancy Rate: Healthy markets aim for >90%.

• Lease Terms: Check tenant credit ratings and lease escalations.

Get Started: Consider a small strip center in Berryessa (95131) with established local tenants and potential to add an ADU office above.

3. Industrial Real Estate

3.1 Definition & Subtypes

Industrial real estate includes properties for manufacturing, warehousing, and distribution:

• Light Industrial: Small warehouses, workshops—found near Creek Valley industrial park.

• Heavy Industrial: Large-scale manufacturing facilities—rare in city limits but present near US-101 corridors.

• Flex Space: Hybrid offices with attached storage, popular with tech startups.

3.2 Why Invest in Industrial?

• E-Commerce Boom: Demand for warehouse space soared as online shopping grew.

• Low Maintenance: Fewer tenant improvements and common-area upkeep.

• Long-Term Leases: 7–15 years typical, hedging inflation.

3.3 Key Metrics to Track

• Triple-Net Lease Structure: Tenant covers most operating costs.

• Load Factor & Clear Height: Determines rental rate per sq ft—higher ceilings command premium.

• Location Access: Proximity to freeways (85, 101) and freight rail.

Get Started: A 20,000-sq-ft light-industrial unit near Silver Creek Valley Road can yield cap rates of 6–6.5% with national logistics tenants.

4. Land (Unimproved Real Estate)

4.1 Definition & Subtypes

Land investments include parcels without buildings:

• Raw Land: No infrastructure—e.g., undeveloped South San Jose parcels near Coyote Creek.

• Infill Lots: Small residential or commercial parcels in built-up areas, allowing new construction (e.g., a tear-down in Willow Glen).

• Agricultural Land: Orchards or grazing land—limited in city limits but present in eastside areas.

4.2 Why Invest in Land?

• Speculative Gains: Appreciation as city expands; South San Jose has seen 10–15% land value growth.

• Development Flexibility: Build any approved property type (residential, mixed-use).

• Lower Entry Cost: Raw land can cost under $500K, versus $1M+ for homes.

4.3 Key Metrics to Track

• Zoning & Entitlements: Check if 95123 lots allow ADU or multi-unit builds.

• Future City Plans: BART extensions or new school zones boost land value.

• Carrying Costs: Property taxes, minimal maintenance (<$1,000/year).

Get Started: Identify a half-acre lot in East San Jose (95111) near pending light-rail stops—buy raw, secure entitlements, then build.

Conclusion

The four types of real estate—residential, commercial, industrial, and land—each offer distinct pathways to wealth in San Jose’s dynamic market. Residential rentals benefit from ADU income and stable demand; commercial properties deliver longer leases and NNN structures; industrial spaces tap e-commerce growth; and land speculates on Bay Area expansion.

By understanding key metrics—median prices, cap rates, rents, and zoning rules—you can choose the strategy that fits your capital, risk tolerance, and goals. Ready to explore real estate opportunities in Evergreen, Almaden, Silver Creek, or beyond? Block Change Real Estate provides the hyperlocal insights and guidance to help you succeed in any property type.