Commercial real estate includes any real estate that is used for commercial purposes (such as retail, hospitals. etc.) not for residential or industrial purposes. Commercial real estate is considered a more stable investment than other types of real estate due to the length of leases, which often last for years or even decades. If you want to start investing in commercial real estate, there are many opportunities and advantages for the investors, tenants and also real estate agents.
FIRST OF ALL – WHAT IS COMMERCIAL REAL ESTATE?
Commercial real estate is real estate used for commerce (or commercial purposes), while residential real estate is used for living and industrial is used for production and storage of goods. Commercial real estate includes office buildings, hospitals, retail spaces and potentially land. There are also multi-purpose office buildings that combine two types of commercial real estate, such as a restaurant in an office building. Because most commercial real estate is expensive, it usually requires more investors than would normally invest in residential real estate such as a single-family home.
COMMERCIAL VS RESIDENTIAL REAL ESTATE
There are several differences between residential and commercial real estate. We can divide them into three categories: the process of buying, renting and selling.
1.) BUYING COMMERCIAL REAL ESTATE
The process of buying a commercial property is usually a lot more complicated than buying a residential property. Because such properties are much more expensive, the purchase itself often involves several partners, who may also have a team involved in finding potential properties. In addition, for a project of buying commercial real estate, it is necessary to contact a real estate agent operating in the commercial real estate market. This will help you find the right investment and remind you what to look out for when buying.
2.) COMMERCIAL LEASING
One of the main reasons why investors choose commercial real estate instead of residential is the structure of the rental relationship. Leases of office buildings can be extended by 10 years or more, making them a more stable investment. Rent can be paid monthly, although it is not uncommon for landlords to require large chunks of rent to be paid in advance.
3.) SELLING COMMERCIAL REAL ESTATE
For a profitable sale, it is best to turn to other investors, and also, it is extremely important to know the right people. The help of a professional real estate agent to sell your commercial property is the best way, as they often have investors on hand looking to buy buildings or real estate like yours. The money you pay for the agent will be more than recouped in the time saved and the money earned by using them.
INVESTING IN COMMERCIAL REAL ESTATE
There are two main ways to invest in commercial real estate.
Firstly, you can invest for rental purposes. As we already mentioned, commercial real estate leases are longer in length, which makes them a more stable investments for unstable markets. If the market does happen to take a dive, for example, your investment should be fairly safe if your lease term is not up yet.
Secondly, you can invest in property appreciation.
Because businesses who rent out commercial buildings largely rely on location to make a living, and because real estate in prime areas is limited – the value of commercial buildings appreciate rather rapidly. This is especially important if you find a potentially lucrative location before it becomes popular.
HOW TO START INVESTING
First, you need to know where the money will come from. You can go with other investors, try crowdfunding or you can do it on your own. Either way, you want as much capital as you can get before you start.
A second important note is to do a good research. After you know your goal for investing you can choose a property according to your plan. If your goal is renting, for example, you will want to know that rent in the area either has a solid track record of remaining steady, or is slowly inclining.
Another way to find a good deal is to work with a top local agent. They will keep you updated about the best deals and connect you with other investors.
As we said, commercial real estate is often a lot more expensive than residential real estate, but what makes it so attractive to investors is the stability of the investment. When purchasing and selling commercial real estate, be sure to use an experienced real estate agent who knows the market well for the best results and deals.
Summarized by: Clever