Commercial real estate investment opportunities are abundant. Retail space, offices, apartments, industrial and multi-family properties are just some examples of commercial real estate properties. By investing in these types of properties, you create opportunities to earn income through appreciation of the property’s value. You may also earn income by renting the space to businesses or private residents. But what exactly do you need to do in order to become a real estate investor? What are the basics that you need to know in order to generate income with your properties? These are important questions you need to answer before you start this process. Whether you are looking into commercial real estate investment for the first time or a seasoned investor, here is some important information that we believe will help guide you toward making the best decision possible for your commercial real estate investment.
How does Commercial Real Estate Differ From Other Investment Opportunities?
Commercial real estate investing differs from traditional forms of investment such as stocks and bonds in some key ways. While stocks and bonds are traded frequently on the secondary market, real estate holds value as a hard asset. Real estate is also a limited, and therefore more valuable, resource. Furthermore, investments in stocks are generally determined by selling potential, while commercial real estate has the added bonus as providing an ongoing source of income. It’s for these reasons we believe commercial real estate to be the superior form of investment.
What are Different Types of Commercial Real Estate?
There are many types 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 to a company in need of office space, with an option to offer a more open space layout where cuticles can be used, smaller 1-2 person offices, or a variety of both. Typical leases for these companies range from 5 to 10 years, which results in an extended period during which rental income will be guaranteed.
Similarly, apartment buildings are purchased with the intent of renting the space. However, standard rental agreements usually are limited to 12 months. These types of spaces are available to individuals and families, rather than just businesses which provide a broader range of tenants to choose from.
Industrial property is more similar to office buildings than apartment buildings in that the tenant is likely to be a company. Whereas office space may be rented to business professionals such as lawyers and entrepreneurs, industrial buildings are more suited 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. It is critical 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.
With so many options available, it’s important to find the investment property that’s right for you. We are available to assist you with your search for your next great investment. Our agents are standing by waiting to help you take your business to the next level.