Things You Need To Know To Invest In Commercial Real Estate

Investing in any type of property, whether commercial or residential, is a great way to build wealth. Commercial real estate investments, in particular, are well known for their ability to provide some of the highest sources of income. If you’ve been thinking of investing in commercial real estate, or have been wondering how to get started in commercial real estate, you’ve come to the right place! Here’s everything you need to know.

What Is Commercial Real Estate?

A property that is typically leased out for business or retail purposes is known as commercial real estate. So, when you invest in commercial real estate, it essentially means that you will be housing only commercial tenants, not residents. Having said that, many residential property investors step into the world of commercial real estate investments by purchasing multi-family properties. Before we delve further into the nitty-gritty of getting into commercial real estate, let’s first understand the types of commercial real estate.  

Types Of Commercial Real Estate Investments

Commercial properties can be broadly categorized into 4 types. These are:

1. Office

Offices are one of the most common and popular commercial real estate types. They range from single-tenant offices to multi-tenant offices and even skyscrapers. Potential office building investors need to further know that there are 3 categories of office spaces:

• Category A: Newly built or fully renovated building located in a premium area.
• Category B: A building that requires minor repairs and renovations before it can be leased out.
• Category C: Commercial office properties that are in dire need of redevelopment fall under this category. These are generally situated in not-so-popular localities and require a lot of capital investment.

2. Industrial

It has been observed that more serious investors generally tend to buy commercial real estate that falls under this category. Manufacturing factories, industrial buildings and warehouses make up this type.

3. Multi-family

Multi-family real estate comprises condominium units, apartment complexes, and smaller multi-family properties which have more than 1 residential unit.

4. Retail

Strip malls, community retail centers, power centers (AKA big-box centers), regional malls, and retail outlets at outparcels all fall under this type of commercial real estate.  

Apart from these four, there’s another type known as Special Purpose Properties. Bowling alleys, car washes, schools, hotels, daycare centers, churches, fitness and healthcare centers, sports stadiums, self-storage facilities, airports, amusement parks, etc. are all examples of Special Purpose Properties.  

Factors To Consider Before Investing In Commercial Real Estate

Before you purchase commercial real estate, here are a few factors you should consider:

Location: It is crucial that you check the location thoroughly before investing in a property. Easy accessibility, proximity to airports and seaports (in the case of industrial units), road infrastructure, and local amenities, all play an important part while selecting a location.

Risk Assessment: You may by now know how to invest in real estate, but investing in commercial real estate is altogether a different ball game. Each type of commercial property has its own specific set of risks and challenges and requires proper investment and risk assessment.

Current Tenants: The current tenants, their feedback, and their financial condition can tell you a lot about the viability of the investment. Grade A tenants usually have longer lock-in periods and tend to give the best ROI.

Building Quality: The previously mentioned categories of office buildings decide your total expenditure. The more the repairs an asset requires, the more you will end up investing.

Market Dynamics: Keeping yourself abreast with which businesses are up-and-coming, which businesses are at the top of their game, and which businesses are stirring the economy, is an excellent way to decide which commercial real estate you should invest in.

Invest In Commercial Real Estate With BFPM

Getting into commercial real estate might seem challenging and intimidating. But with Beach Front Property Management experts by your side, you can know for sure that your investments will be in good hands.  From searching for the right commercial property for you to inspections, leasing, ADA compliance, maintenance, accounting, and marketing, we’ll be with you every step of the way.

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