What is Commercial Real Estate?
Business owners are always on the lookout for profitable investment opportunities. Commercial real estate is popular among business owners because of their potentials for high returns. However, before you embark on your real estate journey, there are several basic things you need to know first to make the most out of your investment and ensure its success.
Commercial Real Estate Defined
Commercial real estate is defined as a property that will likely generate profit through rental income or capital gain. Commercial properties can include office buildings, residential duplexes, warehouses, or restaurants. It is considered as a commercial property if you can earn money if you lease it out, hold it, or resell it.
Different Types of Commercial Real Estate
There are different types of commercial real estate properties and each of them has its own strengths and weaknesses as investment opportunities.
- Industrial
Industrial properties are used for the production, shipment, and storage of goods. This can include distribution centers, warehouses, and factories. Depending on the specific property, an industrial real estate is an affordable and good investment.
A potential thing to watch out for is a tenant’s profitability or the enterprise of a prospective tenant. It is perform to conduct due diligence on every tenant to make sure that they have in demand products to ensure their profitability that affects their ability to pay rent.
2. Multi-Family
Apartment complexes and condo buildings are in fact a type of commercial real estate even if they might not seem like it. Multi-family real estate offers property owners a steady flow of rental income. It is also not that risky since housing has high demand most of the time.
Even when quick tenant turnovers happen, people need somewhere to live. As a result, it is very rare to find apartment complexes with low occupancy. This makes this type of commercial real estate very lucrative.
3. Office
Although this particular type of commercial real estate will require out have higher upfront capital, it can still be very lucrative in the long run if you have the right tenant. Tenants of office spaces will often pay for everything, from taxes, to maintenance, insurance, and others. You can also consider some financing opportunities if the initial capital is out of your budget.
Just make sure that you rent to a profitable business. Some of the most reliable and common tenants for office spaces include dentists, doctors, law firms, and other professionals.
4. Retail
When you speak of retail real estate, this pertain to real estate meant for businesses that offer services or sell consumer goods such as clothing outlets, strip malls, department stores, and even restaurants. This is where people go to shop. Most retail buildings like large malls have a so-called anchor store. This is a store that will entice consumers to the area. For example, it can be the department store in a large mall.
Commercial real estate investments can generate great returns. However, before you take the plunge, always make sure that you familiarize yourself with the ins and outs of the industry to prevent disappointments in the end.