Commercial Real Estate Investment—Get Started & Earn Passive Income
Investing in real estate is a great way to build wealth. When people think about real estate, the first thing that comes to mind is owning a home or becoming a rental property landlord. While these are great wealth-building vehicles, investing in commercial real estate provides some of the highest income streams.
There are almost an unlimited variety of ways to make commercial real estate investments based on factors like asset type, property class, location, and more. Most commercial real estate in the market is owned or controlled by large investment firms such as Real Estate Investment Trusts (REITs) and Private Equity Funds. As an individual investor, REITs can provide real estate exposure without the added risk of owning or operating properties.
Whether you’re investing with a large firm or going about it on your own, your goal is to ensure the commercial realty you choose to invest in can yield a satisfactory return on investment.
Here’s one thing to note; different asset classes have different rates of return.
Which Commercial Properties Make The Best Investments?
The earning potential of commercial real estate investments is undeniable. Commercial investments offer a higher rate of return over a longer period, making them a great way to diversify.
Let’s look at the asset types that provide the best ROI.
Neighborhood Retail Spaces
Strip malls tend to have a balanced tenant mix of grocery shops, drugstores, restaurants, and other daily convenience shops. The diversification of tenants allows you, as an investor, to spread tenant-specific risk across the property. Thanks to smaller suite sizes, vacancy rates are consistently low, especially when compared to big-box retail.
For these reasons, depending on the location of your investment, you’re assured of a stable return potential over the long term since tenants tend to sign multi-year leases. These leases also tend to be net leases, which means tenants bear most of the utility, insurance, and maintenance costs.
Self-storage is an investment opportunity that performs well during good and bad economic times. People use self-storage for many different reasons, including when downsizing, renovating, or relocating. Plus, it’s an easy business to maintain especially in comparison to other rental properties: no toilets to fix, walls to paint, or carpets to replace.
The easiest way to invest in self-storage is by purchasing shares in a REIT. You can also invest in your own self-storage facility by developing one from the ground up or purchasing an existing facility. Self-storage generates great cash flow and can be an extremely lucrative and recession-proof investment when done right.
Investing in hotel and motel real estate can be an excellent way to generate long-term wealth and diversify your investment portfolio. Unlike other forms of commercial real estate, hotels can adjust their room rates easily depending on demand, making them flexible enough to offer a stable return.
There are three main ways you can invest in hotel real estate:
- Buy an actual hotel or motel. The downside is that you’ll be responsible for the day-to-day operations and maintenance, but the returns may be worth the effort with the right management and marketing teams.
- Participate in a crowdfunded hotel investment. If you’ve identified an excellent investment opportunity but don’t have the resources to execute the vision on your own, you can always crowdfund with other real estate investors to raise capital in exchange for an equity interest.
- Buy shares in a hospitality REIT. This is a great option for income-seeking investors, and many REITs trade on major stock exchanges. You can also invest in a hotel brand through the stock market.
Industrial Real Estate
Well-located industrial real estate can offer a great return on investment, particularly if designed to cater to small and medium businesses. Industrial real estate covers a broad group of investment properties, including:
- Flex/office space for research and design
- Light manufacturing facilities for small businesses
- Food manufacturing and processing facilities for restaurants and grocery stores
- Warehouse storage facilities and fulfillment centers
- Cold-storage facilities used to distribute perishable products
Like with hotels, you can invest in industrial real estate by developing your own facility, buying from another investor, crowdfunding, or buying shares in an industrial REIT. These properties offer higher diversity, which means long-term cash flow and hassle-free passive income. Also, if they do require maintenance, it will be less frequent than residential real estate or retail properties.
Diversify Your Portfolio
Commercial real estate investments can offer more financial rewards than residential properties, but the risk climate can also be more volatile. That’s why it’s important to take the time and do your due diligence to make the investment decision that’s best for you.
You need to work with a commercial real estate agent to ensure you are choosing the right properties to invest in. Anthony Macaroni has decades of experience helping clients like you diversify their investment portfolios with commercial real estate opportunities. Anthony has connections with property managers and real estate professionals in the Palm Harbor area. This allows him a unique insight into listed and unlisted properties you can invest in.
Contact Anthony Maccaroni today to schedule a free consultation and begin diversifying your portfolio today.