If you have decided to invest in Commercial real estate, one of the first questions to ask yourself would be – what type of commercial property to invest in?
With various types of Commercial real estate properties, it can be challenging to narrow down on the single best example of investment.
So, how do you decide what’s the best type of commercial real estate property? Ask around for answers from your friends and family? Sure, yes. But will it always be the most reliable?
Not really.
What worked out for your old uncle Sam 20 years ago might not work out for you today. Similarly what may have worked out for your friend who stays miles away from where you live might be out of the question for you.
Consulting a real estate expert on commercial real estate property is your best way of doing it if you want to get it right.
As a matter of fact, there is NO single best type of Commercial property to invest. What’s best for someone might not be the best one for you.
It largely depends on how much investment you want to make and how much time you wish to spend on this actively. Also, what is your primary agenda behind investing and what is your risk-taking ability and so on.
Suggestions in this blog based on the principle of averaging out all other options to invest. But we still recommend hiring an expert to help you make the final call about the best type of commercial property to invest.
Best Types of Commercial Properties to invest in in the year 2019
1. Multi-family Properties
Multi-family Properties would top the list here. Multi-family Properties are buildings with more than four residential units in a single building, making it possible for multiple families to reside.
These make for the best kinds of Commercial real estate investments because the market here is evergreen with steady hike in the number of people moving into the major cities of the USA.
An increase in the population and job opportunities indicates that more people are looking for housing. In case of single-family properties are saturated, people are actively looking to rent out spaces in multi-family Properties.
You cannot go wrong in deciding on investing in multi-family Properties as long as you don’t choose a place with the worst location and the neighborhood. What’s more, is that the tenant mix that’s probably going to rent out multi-family units are by large millennials!
The millennials are always on a lookout for a space they can rent out at reasonable prices over the old school approach of purchasing a property.
So, if you want to tap on this market, investing in multi-family properties is a great start which in most cases brings you a stable and lucrative rental income.
On the downside, however, is the high maintenance charges that are required to operate multi-family properties.
With more than 5-6 tenants living in, as an owner, you will be needed to deal with everything that’s creating trouble in your apartment. Now, many investors who intend to invest in commercial properties may not be interested in taking the pain of dealing with every problem, big or small, going to happen to it.
This is especially true for savvy investors who have a portfolio of real estate investments across the States.
The good news that there’s a smart fix to this issue, at a small price. Hiring an asset management company to manage your multi-family property can save you the pain and time needed to deal with the maintenance of multi-family properties.
Asset management companies offer full maintenance of these properties – right from fixing the toilet issues that occurred at an odd hour, to talking to tenants about the problems and concerns they’re facing at the apartment and collecting rents from every tenant on time.
So if you’re looking to make some serious money from commercial real estate investing, multi-family properties is without any doubt a great option!
2. Self-storage units
Next up on the list would be self-storage spaces. These spaces which are rented out to people who want to store their stock, commodities, or just about anything.
These are great spaces to put money into because they do not fluctuate as much according to the changing economic status of the country.
People will always need extra spaces to store, and so, these can never go out of trend. The best part about self-storage spaces is that it doesn’t require any maintenance – no worrying about the clogged toilets, or redoing the paint or trimming the plants in the garden (yes, we’re referring to multi-family properties).
The only thing you will need to do when one tenant decides to move out is to sweep out the stuff, and put an ad to find your next new tenant.
The downside, however, is the competition.
If you find a competitor close to your space, you’ll never know when your tenants are thinking about moving into your competitors’ area, which can often force you to bring your rent rates down. But other than that, self-storage buildings are quite a safe low-risk kind of commercial real estate investment.
3. Shopping malls
Shopping malls are also one of the best types of Commercial real estate investments. The best part about investing in shopping malls is that they are easily manageable and are stellar stable!
You might find difficulty in procuring rent from the residential tenants who live in your multi-family property, but that’s rarely the case with your tenants in shopping malls.
The big reason behind this is that your tenants here are business owners and they’re often more prompt and professional in their dealings and almost always, pay rent on time.
On the same lines, if your commercial space tenants have a concern in the mall – for example, the lift is out of maintenance, they will write an email to you or call you to bring the notice to light. The last thing they would do is to write a negative review on your page.
Renting out Commercial business spaces to business owners is thus very stable and less of a headache on many fronts. On the downside, though – the changes in the state’s economy can have an enormous impact on your earnings.
An unexpected doom in the marketplace might force a majority of your business tenants out, and you’ll be running a vacant shopping mall until you’ve found your next bunch of newer business tenants.
The location of the property is the most crucial factor that decides if or not investing in a shopping mall property makes sense to you.
4. Co-working spaces
Co-working spaces are the newest addition to the list of best Commercial real estate investment properties. With an increase in the number of people choosing to work remotely or freelance, co-working spaces are in high demand, especially in metropolitan cities.
The per-square-foot rates for co-working spaces beat every other kind of commercial office space property, and you cannot get this wrong if you choose the location and the neighborhood wisely.
Maintenance of co-working spaces shouldn’t be much of a headache as you’ll find convenient and efficient asset management companies to look after it . Striking off the maintenance part, everything else about co-working spaces is lovely.
One – you don’t run out on tenants as there’s an increasing demand for such spaces amongst the remote and freelance workers. Two – all the perks of shopping malls can be enjoyed here too as your potential tenants are again people who run small to medium businesses.
Bottom line: A sweet mix of multi-family properties and shopping malls is what co-working spaces are. So you’ll get to reap the benefits of both multi-family properties and shopping malls if you invest in Co-working spaces.
5. Mobile home parks
Last up on the list would be mobile home parks. These make for a tremendous commercial real estate working investment for as long as tenants own their homes.
These are low-maintenance, and a little landscaping now and then is just about everything you’ll need to do to keep the cash flowing in.
As these are taken by homeowners themselves, most of the maintenance will be completed by owners, and they generally pay their rent on time, too! This type of Commercial real estate investment may not be one of the most lucrative ones, but it is a safe and stable one for sure.
Advantages of Knowing the market area and supply and demand
A popular investment sector is commercial real estate (CRE). It offers growth, passive income, and steady returns. This area of real estate is an alternative investment. It is growing in popularity.
Despite the profit potential, not all commercial investments are regarded equally. This is true even for CRE. Knowing what, when, and how to invest is critical. It’s key to success or failure in commercial real estate.
Not all properties are the same.
Asset types in commercial real estate are diverse. CRE has five main sectors. They are: industrial, office, retail, multifamily, and special purpose. But, there are many other property types, such as self-storage, land, medical, elder care, and hotel. Each sector’s yield, supply, and profits differ significantly.
Know the market area and supply and demand
Every market is unique. This should be a top priority when investing in commercial real estate. When you invest, you fund a region. It has distinct supply and demand. On the surface, some property types might be doing well, yet there might be an oversupply in your city, or vice versa.
Recognize market cycles
Nothing endures indefinitely. GDP, unemployment, and the economy’s state all directly affect commercial real estate profits. You can avoid being forced to sell when the market is weak.
And, you can avoid buying when the market is strong. You can do this by understanding how real estate market cycles work with the help of Private Capital Investors. Also, knowing specific market cycle markers will help identify current chances. They will also inform better investing choices.
Why Should You Invest in Off-Market Commercial Properties?
Discovering off-market commercial real estate can give investors access to better offers. These offers are better than those currently on the market. Investors may be able to access unique, sought-after homes. They can make agreements that benefit both the present owner and themselves.
These are insider deals for the savvy enough to uncover them. Finding one is, of course, the critical part. Advantages that off-market commercial properties Private Capital Investors may offer. Buying off-market commercial real estate has several advantages. Among the benefits that they offer include:
1. Get Exclusive Offers
Not all of the most sought-after houses ever come up for sale. Having access to these off-market transactions can make a portfolio much more impressive.
2. Reduced Rivalry
Other investors will only make buy offers if they know a property is off-market. When negotiating the conditions of a sale, less competition may be advantageous.
3. Cut Down on Fees
Sometimes, off-market real estate deals can be without the seller’s agent. This lowers the commissions that must be paid. Real estate transactions often involve seven or eight figures. So, even a tiny cost decrease can lead to significant savings.
4. Agreement Framework
Many owners may not have even considered selling their assets. This enables purchasers to customize the offer and its structure. A deal’s structure might change in talks, but how an offer is presented at first can influence the conversation.
5. Confidentiality
Frequently, these transactions can be carried out discreetly, away from prying eyes. For most, this is a minor point. But it might help sellers (or buyers). They are not advertising a property transfer for personal or professional reasons.
These are our top 5 kinds of commercial real estate investment types. Check out our blog section to explore more on the latest trends in Commercial real estate markets. If you’re looking for commercial real estate loans to finance your investment, we’d love to respond to your queries and provide you the best mortgage that’ll perfect your needs. Talk to our team today!
