What is Commercial Real Estate?
Commercial Real Estate is a broad categorization covering
all properties purchased that are not used as primary residences.
This term also encompasses both the property itself, natural
resources and any buildings constructed on the land.
What kinds of properties can you buy and sell?
There is a very wide range of properties available in the commercial
real estate market. Searching for the right commercial properties
and figuring out what type is best for your investment needs is
critical to your success as a commercial realestate investor. Some
common types are:
Apartments - Small and medium multi-tenant
residences make for a wonderful introductory investment. Each month,
income is generated from rent, and the needs of your tenants equate
with practical living. However, owning apartments can also be a
challenge during periods of high turnover or tenant conflicts.
Office Buildings - These properties are typically
leased by businesses, including corporations, and serve as their
primary work environment. Offices yield the benefits of longer-term
leases at favorable rates from high paying companies. However, this
type of commercial property is more susceptible to market forces.
When the economy is bad, vacancies rise when businesses are forced
to close their doors and employees laid off.
Retail property - Owning a storefront can make a
great business opportunity for an involved investor. Due to the
variety of potential tenants (think supermarkets to single retail
stores), the scale of facilities will vary widely. However, the
potential for long-term leasing and the ability of clientele to
raise the value of the overall retail complex is significant.
What types of people invest in commercial property?
Most commercial property investors have a significant amount of
capital (100k+) and plan to invest over a long timeframe (5+ years).
At this level the investments tend to be fairly stable cash flow
generators with a decent chance at appreciation. More experienced
investors are able to increase the total capital invested to
billions and focus on much shorter timeframes. This represents a
higher risk, but by becoming experts in repositioning property these
experienced investors can generate a much greater amount of revenue
(targeting 20%+ rather than 10%).
How much time does it take to invest?
We recommend dedicating a minimum of 10 hours of week to invest when
you get started. This may seem high, but with the amount of capital
you are putting at risk, it is best to ensure that you are paying
attention to your investment. Also, there is great potential for you
to improve the property you purchase to increase its sale value. As
you become more experienced, many find that commercial realestate
investing becomes a passion and a complete career. Alternatively,
once you get the hang of the investment game and hold a few stable
properties with great revenue the time required to maintain them
will diminish over time (potentially less than 10 hours a month).
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