As we head into the prime real estate buying months, it’s worth pondering what this particular asset class means in an investment portfolio.

Real estate is much, much more than a downtown office complex. Investments can span the vacant lot on the edge of town, apartment buildings, and the strip mall where you run errands. They serve a wide variety of needs for an equally wide variety of investors.

Investment real estate can be bought and sold as individual properties; as part of a limited partnership, in which one or more properties are managed by a general partner; or as a real estate investment trust, or REIT (pronounced “reet”), which is a security that trades like a stock on the major exchanges and invests directly in either properties or mortgages.

Each of these investment structures has its own characteristics and risks. But because most, if not all, commercial property is financed, it is highly sensitive to movements in interest rates.

With interest rates coming off 45-year lows, this has been a boom time for real estate. In Minnesota, the value appreciation of private residential and apartment buildings has far outpaced that of commercial real estate, which is much more sensitive to business conditions, particularly employment levels.

Here are a few more considerations as you look at real estate investment options.

Raw or vacant land is the most illiquid of all real estate. It needs to benefit from expanding demand and travel patterns, and be properly zoned for the best use, and this is one of its most significant risks: If growth doesn’t come to the area, or zoning isn’t favorable, the value of the property doesn’t increase. Raw land is best suited to investors such as developers, speculators, or estates.

Apartment buildings benefit from a growing population, but location—and sometimes a prestige factor—is just as important in determining value. Many apartment buildings are highly leveraged, which is both a source of significant appreciation and a concomitant downside should their value decline. Apartments, which are moderately liquid investments, are also a source of income from rents, and offer tax benefits from the depreciation of the property.

Office buildings are dependent on a growing economy. Their value is contingent on location, tenant mix, and, sometimes, prestige. Both apartment buildings and office buildings benefit from professional management, which can protect them from losing value to competing buildings. Nonetheless, office buildings are at risk of obsolescence if there’s a shift in the local patterns of business activity. Like apartments, they offer income, potential capital gains, and a tax advantage from depreciation.

Warehouses are a good source of income, particularly for older investors in search of cash flow, a limited amount of appreciation, and a tax-advantaged (depreciation-credit) investment. The most passive form of real estate investment, warehouses have to be properly located relative to commercial and industrial activity. Like office buildings, they are subject to obsolescence due to changes in technology and material handling equipment.

Neighborhood shopping centers are especially sensitive to tenant mix as it relates to local spending patterns. They also must be conveniently located with good parking. Their value can increase with growth in the community itself or in the income levels of the shoppers who frequent them. Having experienced management that can negotiate leases effectively and maintain low vacancy levels is critical. The most suitable investors: relatively high-income individuals in search of tax advantages (depreciation) and a rate of return based on periodic income and value appreciation.

Motels and hotels get their value from location, quality of facilities, and demand. They also depend on economic factors such as the health of conference business, tourism, and the broader national economy as it affects travel. They require very active management and, like shopping centers, offer moderate liquidity but only moderate to poor leverage. Motels and hotels provide a tax benefit through depreciation, and a return of periodic income and value appreciation.

Distinctions like these give real estate a place in almost every investment portfolio.