Investing in commercial real estate is an exciting and worthwhile venture for both smaller investors looking for their next step and real estate investors moving into commercial property investing. No matter if you’re new to investing in real estate or have only invested in residential real estate,the guide below will help you learn how to invest in commercial real estate with confidence.
What is Commercial Real Estate?
Before learning how to invest in commercial real estate,it’s best to know what kind of properties fall under the large category. A rule of thumb to remember regarding commercial real estate properties is that if they’re used for business purposes,then they are commercial spaces. Specifically,there are five main categories:
- Multifamily properties,such as apartment complexes
- Retail properties,such as strip malls
- Office spaces
- Industrial properties,such as data centers or self-storage
- Special purposes,such as a place of worship,hotel,or health care
The commercial properties above can be bought for owner-occupied businesses or as an investment to increase cash flow or to grow a portfolio. Each type of property has to be dealt with as its own category,as each space is designed for specific purposes. When looking to invest in commercial real estate,you cannot treat each property as the same thing because they’re all for a business of one sort or another.
The Benefits of Investing
There is a myriad of benefits that comes with how to invest in commercial real estate vs. residential properties. Chief among the reasons why commercial real estate is an appealing asset is because you can invest in properties with multiple streams of income. This isn’t the case with residential property for if the tenant stops paying,you lose your income and residential tenant rights make eviction very difficult.
Another benefit of learning how to invest in commercial real estate is that it’s a key to potentially earning a higher steady income. Of course,this depends on numerous factors such as the lease agreement,the size of the property,and what kind of property it is,as well as how many commercial properties you own or invest in. Though it isn’t far-fetched to say that depending on the factors above,you could generate hundreds of thousands of dollars in cash flow annually.
Speaking of leases,residential properties are significantly different than commercial real estate properties. One example is that commercial property leases sometimes put the responsibility of paying property taxes,maintenance,and insurance on the tenants,saving the owner/investor more money. Another perk to commercial real estate leases is that they tend to be significantly longer than residential,often 24 to 36 months long with notice to vacate typically more than 30 days.
The personal benefits to investing in commercial real estate are unique to you and your situation,but the advantages discussed above apply to anyone wanting to learn how to invest in commercial real estate.
Investing in the Right Properties
A challenge many investors face is finding the right property and that is key to having a return on your investment. As one of the largest developers,property managers,and a leading commercial real estate firm,we understand what to look for and the nuances for commercial real estate investing. Since 1937 we’ve handled properties of all sorts and currently over 4 million square feet of commercial property. Discover more about working with experienced experts in commercial leases by following the link below and happy negotiating!