Commercial real estate is an attractive investment option for those looking for a passive form of income with a high rate of return. This market has become much more active in the last decade, thanks to investment trusts and crowdfunding options making it more accessible to all levels of investors. Let’s take a look at a beginner’s guide to investing in the commercial real estate market.
Commercial real estate is any property used for business or income-generating purposes. Office space, retail space, industrial complexes, and multi-family units are all examples of commercial real estate properties. Real estate that falls under this category generates profit for the investor through rental or lease fees and capital appreciation of the property.
Funding for commercial real estate investment can come from personal capital, crowdfunding, or a real estate investment trust (REIT). Commercial properties tend to require a much higher investment level than residential buildings. Areas that can be considered commercial are zoned differently, controlled by local laws and ordinances.
Many investment groups and individuals earn income through their commercial property via lease, meaning that they rent out smaller parcels of their property for use by other businesses. These leases are typically longer than a standard residential rental agreement.
Commercial properties require a higher upfront cost than residential properties with a more significant risk assumption. However, these properties can also lead to bigger payouts in the end. Let’s take a look at some of the benefits of commercial real estate investment.
Commercial properties return a higher revenue and, likewise, a higher profit compared to residential properties. For the most part, this income is relatively passive for the investor. Many of the day-to-day operational tasks are passed on to the lessee, taking them out of the hands of investors.
Leases on commercial properties tend to be quite long, with some up to ten years or more. Businesses that settle into a commercial space put down roots, which can provide long-term financial advantages.
Commercial properties are often operated as triple net leases, meaning that the lessee takes on many of the insurance costs, maintenance, and taxes associated with the property. This, combined with long lease terms, brings in a prolonged, steady cash flow for investors. Commercial property is a consistent investment strategy, offering more stability than market investment.
Real estate investment is a wise choice for those looking to mix up their investment strategy. The consistent, passive income is attractive for investors looking for a low-effort, high-return strategy.
The first step of any investment decision is contacting a local agent who has vast experience in the commercial real estate market. An agent can help you find the perfect commercial property for your personal business use or as an investment tool. Your agent can connect you with a team of professionals to guide you through the purchase process. A commercial real estate investment typically requires your agent, a mortgage lender, a real estate attorney, an inspector, and an accountant to make the process move seamlessly.
Jamie's passion to serve people enables her to show clients properties within their budgets. She also acknowledges that real agency requires respect for diversity.
