What is commercial real estate investing?
Commercial real estate investing is a wealth-building strategy like investing in the stock market or a retirement plan. Investors gain income from leasing the space to other businesses and selling the commercial property, which typically gains value over time.
The Difference Between Commercial and Residential Real Estate
Commercial real estate is used for business-related purposes, whereas residential real estate provides housing where people live. Housing can be classified as commercial real estate if you are leasing the property to tenants. But commercial real estate also includes a variety of other categories.
Commercial Property Types
Unless you live in a remote location, there are probably commercial properties all around you–healthcare facilities, retailers, manufacturing operations, office buildings, storage facilities, and more. The businesses that reside in these buildings may lease the space from commercial real estate investors versus owning the property.
There are many different types of office buildings – from skyscrapers to single-story buildings. These properties are workspaces for professional services companies like law firms, tech companies, advertising agencies, insurance brokers, and financial services.
Industrial real estate is typically where the manufacturing of goods happens – like a steel mill or an automotive component assembly operation, for example. These buildings are used to create products, store goods and materials, and also may include research and development facilities.
Retail includes a range of property types big and small, from stand-alone locations to plazas with many retailers, and even large malls. These are locations where we typically go to buy the merchandise we use in daily life and include grocers, clothing stores, restaurants, drug stores, major big-box retailers like The Home Depot or Target, and more.
This type of commercial property is where someone rents a space to live like an apartment complex. This category can include large high-rise properties with amenities such as a gym or pool, or it can be a low-rise structure with a handful of rental units.
This category includes everything from budget hotels to large resorts packed with amenities. Think of this category simply as commercial properties for short-term housing needs.
Self-storage is just like it sounds: it’s anywhere people can store personal or business possessions. These facilities are used to safely house furniture, automobiles, boats, and more.
Senior housing includes a variety of specialized care facilities for older adults, including nursing homes, independent living, assisted living, and other long-term care facilities.
Commercial Loan Options
There are many commercial loan types to meet an investor’s needs. Each type of loan has unique eligibility requirements and terms. A few of the commercial loan options include:
- Small Business Administration Loans
- Conventional Loans
- Commercial Bridge Loans
- Hard Money Loans
- Conduit Loans
Benefits and Risks
One of the primary benefits of commercial real estate investing is the monthly income from leasing the property. If the property is well maintained and updated as needed, it’s a great source of regular income. Plus, it delivers returns when the property is sold, particularly in favorable market conditions.
One of the drawbacks of commercial real estate investment is that it doesn’t come without risk. It requires a lot of capital to get into commercial real estate investing and considerable resources to maintain properties. There are many complex regulations to know with commercial real estate, so education is critical.
How to Get Started
If you are interested in commercial real estate investment, the best place to start is to educate yourself on options that appeal to you. You can also talk with other experienced real estate investment professionals to learn more about the risks and rewards.
Mattingly Ford Title Services
The team at Mattingly Ford Title can prepare all the documentation needed for virtually any commercial transaction – from a $100,000 purchase of an office condominium to a $60,000,000 blanket equity line of credit.