Starting an investment in commercial real estate requires more than just the desire to expand your financial portfolio. Before making any selections, the astute investor does extensive study into the commercial property categories that are the most lucrative. It’s critical to have absolute confidence in your ability to offer your investment your whole attention.
Additionally, it’s critical to confirm that the business property you select will provide a respectable return on investment. There are several investment vehicles accessible nowadays, and your preparation for investments should take into account the likely ROI.
In light of this, you might be asking what the most lucrative commercial real estate property kinds are for investors if you have made the decision to invest in commercial real estate. Trusting an experienced staff to offer insight is one of the finest ways to gain additional knowledge about this sector. Here are some of the best commercial real estate investments to make when first entering the real estate market:
Properties With a High Number of Tenants
Properties capable of bringing in the highest return on investments are typically those with the highest number of tenants. These properties include RV parks, apartment complexes, student housing, office buildings, and storage facilities. Explore various profitable commercial real estate investments by viewing some current listings.
With more tenants on your property, your income becomes more significant. Likewise, the higher the demand for the property, the less you’ll have to worry about finding new tenants on a short-term notice. It is a simple consideration that can make a difference in your investment.
Properties in Areas With Growth
In the retail world, properties that are located in high-traffic areas are more likely to attract tenants willing to renew their leases, as well as attract new tenants should your tenants leave or go out of business. The same principle is valid on a macro-scale. Fast-growing suburbs and other in-demand neighborhoods are popular among real estate investors. When working with Sands Investment Group, for example, they can advise you on these areas as the market changes, so you are consistently given the best opportunities.
Properties With Triple Net Leases
While properties with the highest return on investment typically have the highest number of tenants, a triple net property is a high-ROI exception to the rule. Triple net properties are usually single-tenant spaces, but those tenants are more likely to sign long-term leases. Triple net properties are also ideal for those new to the commercial real estate market. This is because NNN leasing places the responsibility of paying real estate taxes, maintenance, and building insurance into your tenant’s hands.
It enables you to have a stable income from your investment rather than estimating your payment based on projected maintenance costs. Furthermore, you have more time to work at your day job because you don’t need to worry about performing maintenance. This is especially handy for the increasing number of millennials interested in investing in real estate. It makes the process easier while making the investment fit better into any lifestyle.
When most individual investors think about making money in real estate, they probably think about the equity in their own homes, house flipping, or the residential real estate market.
But the commercial real estate (CRE) market also offers a wide range of options for investors, including office, retail, and larger apartment buildings. If you’re interested in taking advantage of the opportunities in CRE, here are five ways you can do it.
1. Buy REITs
If you invest in the stock market, then probably the easiest way to get exposure to the CRE market is by buying shares of real estate investment trusts (REITs). These are real estate companies that are required to pay out 90% of their profits as dividends.
In CRE, investors can choose from REITs such as Vornado Realty Trust, which owns office buildings; Tanger Factory Outlet Center, which owns outlet malls; and Park Hotels & Resorts, which owns hotels. There’s a wide variety to choose from depending on the sector you want exposure to.
2. Become a landlord
If you’re looking for a hands-on way to get into CRE, you may want to consider becoming a landlord. You may be able to afford a small property in your area, and commercial rents generally offer higher rents per square foot than residential properties. However, you may also have to provide amenities like parking space, lighting, and common area maintenance.
CRE can offer tax-related benefits such as depreciation that you can use to your advantage. If you already have some experience being a landlord, you may want to consider purchasing a commercial property.
3. Become a limited partner
Most CRE businesses are privately held, so if you’re looking for a wide range of opportunities in CRE, one of the best ways is to become a limited partner in a private company. Limited partners provide capital for a business but are generally not involved in the management of the business.
You can find opportunities to become a limited partner in private businesses online or through your personal network. Still, you will need to be an “accredited” investor, meaning you have a minimum net worth of $1,000,000 or an individual income of $200,000.
4. Invest in a private equity fund
One alternative to investing in a publicly traded REIT is to invest in a CRE private fund. Though CRE private equity doesn’t offer the liquidity of a public REIT, private CRE has historically outperformed public companies and offers tax benefits that public REITs don’t.
In a private equity fund, your investment will be divided across a number of properties through a “blind pool,” so you won’t know where the money is being invested at the time of your investment. Therefore, you should be familiar with the fund’s track record and general strategy.
5. Real estate crowdfunding
Crowdfunding sites offer another new way to get invested in CRE. For as little as $10, you can invest in CRE with sites like Fundrise, CrowdStreet, and Realty Mogul.
Crowdfunding sites like Fundrise can expose you to a wide range of CRE assets, including apartment buildings, offices, and retail stores, allowing you to benefit from both capital appreciation and rental income. Crowdfunding also offers the benefit of investing in CRE with only a small amount of capital.