What is commercial real estate?
What exactly qualifies as commercial real estate? At its most basic, commercial real estate is any property used primarily for business purposes. It can include all the major categories such as retail stores, office buildings, industrial warehouses and restaurants. Commercial real estate also includes more specialised property including storage spaces, hotels, casinos and even healthcare facilities.
Common ways to invest in commercial real estate
1. Outright property ownership
Firstly, an investor can purchase a commercial property outright. After which the investor owns and operates the property. If you can afford to buy a property on your own, these investments present a considerable opportunity to obtain both steady income and appreciation. However, given the high cost, buying a commercial property outright is often not realistic. It also requires a significant amount of effort.
2. Traditional direct investing
Secondly, investors can purchase a debt or equity stake in a commercial property. This is usually done by pooling their funds in a limited liability company (LLC). By combining resources, direct investing offers a way for multiple investors to access commercial real estate. In addition, the minimum investment amount is often significantly less than outright property ownership.
3. Publicly traded REITs
In this case, investors purchase shares in a real estate investment trust (REIT) that retains a range of income-producing commercial real estate properties. They then obtain a share of the properties’ earnings on an ongoing basis. REITs offer a simple, liquid way for investors to add commercial real estate to their portfolios.
4. Real estate crowdfunding
This method of investing allows you to hand-pick individual real estate projects. Select ones that align with your financial goals, alongside a pool of other investors. The fact that these projects are listed in online marketplaces generally makes it easier to find opportunities. This is especially true for opportunities outside your home city.