Commercial Real Estate: Best Real Estate Property Types
Investing in commercial real estate can be an excellent way to make money and build a business. However, not all property types are equal. Furthermore, you should stick to one kind of property for a while to get the hang of the business before you expand to other categories. That’s why it’s vital to understand the differences in properties before you start your real estate adventure.
If you already own one or two single-family homes that you rent, an apartment building might be a great way to break into the commercial real estate business. This can include a small complex with just five or ten units, or it can mean going all-in with a large building with dozens or hundreds of units.
There are several reasons to start with residential properties. First, they are everywhere. Just about every neighborhood has an apartment complex, so you can find a good fit easily. Furthermore, banks are usually happy to lend for this sort of investment because they are real cash generators if you run them right.
This category includes both office spaces and warehouses. While they may not seem similar at first glance, these building types have many of the same advantages. First and foremost, they are what is known as “triple net leases.”
This term means that the tenant not only pays rent, but you also charge for maintenance, insurance, and real estate taxes. Furthermore, these spaces generally come with long-term leases up to 20 years. That means you can spend less time looking for tenants than you would with residential buildings.
This type of commercial real estate includes things like shopping malls and strip malls. The tenants are consumer-facing businesses like salons and stores. Much like with warehouses and offices, you can make these properties have triple net leases. When taxes go up, you won’t be stuck with the bill.
What About Hotels and Land?
Hotels are complex businesses that may not be suited for new investors. Although you may eventually work up to owning a hotel, it’s better to start with a simpler property to get your feet wet. Similarly, land development can be both exciting and tricky. It’s better to have a good idea what you’re doing before you jump into this kind of property.
If you’re looking to get into the commercial real estate game, consider starting with apartments, warehouses, office spaces, and retail centers. These types of properties can give you the income you need without too much hassle.