Investing in real estate is an excellent way to build wealth. Commercial real estate investing, in particular, has a reputation for producing some of the highest revenue streams. If you’ve been buying residential real estate for a while and wonder how to get started in commercial real estate, this guide will teach you everything you need to know.
Why Invest in Commercial Real Estate?
Commercial real estate is an enticing asset class to invest in because it allows for multiple revenue streams. If a residential rental property’s renters stop paying rent, you lose 100% of your income until you find a new tenant. If you own a commercial property with multiple units, you have additional revenue streams to cover any vacancies. It is also a more secure investment.
5 Steps On Investing In Commercial Real Estate
It is up to you to determine the best way to invest in commercial real estate based on your objectives and preferences. Here’s how to get started if you want to own, manage, and invest in commercial property actively.
1. Identify Your Niche
Commercial real estate encompasses many property types that are analyzed, maintained, and rented in distinct ways, and investing in CRE differs significantly from investing in residential real estate. Owning a storage facility, for example, is not the same as owning an apartment complex, mobile home park, or industrial structure.
Each type of property does have its own set of expenses, lease agreements, and rental income sources. You must understand the distinctions between a triple net lease and a gross lease, as well as how to account for vacancy rates and calculate the property’s net operating income (NOI), among other concepts.
2. Determine Your Market
After you’ve decided on the type of property you want to buy, narrow down your market options. You can put your money to work in your neighborhood, city, province, or even further afield. The goal is to find a market where supply has not yet caught up with demand and demand for your CRE industry remains high. Examine the current and planned development in the area and vacancy rates, and overall market performance for your industry. Are you in the market for the best commercial real estate New Brunswick has to offer? Firstly you have to conduct research to learn more about the area.
3. Look For An Investment Opportunity.
Then, begin looking for a business opportunity to invest in. There are numerous companies like Cushman & Wakefield Atlantic Halifax where you can check for investment properties for sale. You can also find sellers through direct mail marketing or a commercial broker specializing in CRE investments.
4. Obtain Funds
As soon as the contract is approved, you should begin working on obtaining financing. CRE can be financed in several ways, including:
- Conventional loan
- SBA loan
- Crowdfunding or syndication
- Owner financing
- Private loan
- Bridge lenders
- Hard money loans
5. Manage The Property
Once the loan is approved, the real work begins. You now own a commercial property that you must maintain and manage. If the property needs to be improved, you will be in charge of organizing the repairs with contractors while keeping the property’s day-to-day operations running. Interested already? Click here to check on the best real estate properties Canada’s Atlantic coast has to offer.
These five steps serve as the foundation for active commercial real estate investing. This is meant to give a high-level overview of the investment process rather than a detailed breakdown of each stage of CRE investing. Do your own research and begin working your way through this list if you want to learn more.