Commercial real estate investment opportunities are abundant. Retail space, offices, apartments, industrial and multi-family properties are all examples of commercial real estate properties. By investing in these types of properties, you may be able to earn income through both appreciation and by generating income when you rent out your available space or others earn income through the operation of the building. But what exactly do you need to do in order to become a real estate investor and what are the basics that you need to know in order to generate income with your properties?
How is Commercial Real Estate Investment Different From Other Forms of Investing?
Commercial real estate investing is different from traditional forms of investment such as investing in stocks and bonds. While stocks and bonds are traded frequently on the secondary market, real estate holds value as a hard asset. Real estate is also considered to be a scarce resource. Furthermore, investments in stocks are generally made due to the selling potential of the stocks, while commercial real estate is typically purchased primarily to serve as a source of income. For these reasons, many consider commercial real estate to be the superior form of investment.
What are the Types of Commercial Real Estate?
There are many examples of commercial real estate from which you can choose to purchase. Some of these include:
- Apartment Buildings
- Industrial Property
- Medical Centers
- Office Buildings
When investing in commercial real estate property such as an office building, you may rent your space out to a company in need of office space that may be set up with cubicles or with several smaller offices, Typically, a company will sign a lease ranging from 5 to 10 years to use the space, during which time you will be paid rent for the use of the space.
Similarly, apartment buildings are typically purchased with the intent of renting the space, those leases are typically not for any longer than a year. In addition, with an apartment building, the space is rented to an individual or to families rather than to businesses.
Industrial property is more similar to office building space in that the tenant is likely to be a company. Whereas office buildings may be rented to tenants such as lawyers who are looking for office space, industrial buildings are generally rented out to manufacturing or distribution companies. Leases for industrial buildings tend to be for five years or more.
How Does Commercial Real Estate Create Value Through Appreciation?
Appreciation is another means by which commercial real estate can serve as a sound investment. Appreciation means the value of the property increases over time, providing you with an opportunity to make money by selling the property. Of course, it is also possible for a property to lose value over time. Therefore, it is important for you to do your research and purchase a property that is more likely to increase in value rather than lose value.
You can also take active steps to help increase the value of the property by making certain improvements. For example, making cosmetic improvements or upgrading appliances in a multi-family apartment building will help you command a higher rental rate while also increasing the overall value of the property. Taking steps to get an adjacent property rezoned can also be beneficial when it comes to increasing the value of your property. Rezoning that land from residential to multi-family so more apartments can be built, for example, may help to increase the value of your property as well.
If you ready to take your first steps toward commercial real estate investment, contact Keller Williams New York at (718) 697-6800 or [email protected] today!