There is a reason most real estate investors start with residential property: low price, simplicity financingand the relatively simple operation means that it is much more accessible to the average investor. While a lot of money can be made from residential real estate, it is common knowledge that commercial property (CRE) is where the big salaries in real estate happen.
So why not get into commercial real estate? It is expensive. Commercial real estate is an asset class often designed for accredited investors who have the experience and money to support purchases ranging from hundreds of thousands to millions of dollars at a time. But fortunately, investors no longer have to wait years or decades to build a large enough portfolio to trade upwards. Instead, there are several ways that regular investors can engage in commercial real estate with much less time, money and effort.
Overcoming Barriers to Commercial Real Estate Investing
Real estate investment funds (REIT) is by far the most popular method of investing in commercial real estate in an affordable, hands off manner. There are real estate investment funds for every asset class in commercial real estate, including real estate debt. Investors can purchase shares in these companies, which provides access to investment grade commercial real estate in a diversified geographic area with professional management. Not every REIT is a winner, which means that investors need to pursue their due diligence research the company and market opportunities carefully before investing.
Real estate crowdfunding has become an increasingly popular method of investing in commercial real estate without the need to invest huge amounts of capital or time in underwriting and investment management. Different investment funding opportunities will be presented on different crowdfunding platforms. The investment is managed by a third party sponsor who is responsible for overseeing the investment and pays an agreed rate of return or share of the return to participating investors.
Each investment platform can dictate any requirements for an investor, such as a minimum amount or the need to be an accredited investor, but some allow investors to participate for several thousand dollars. This provides access to large commercial deals that are usually not available to small investors.
You have to pay to play CRE
The barriers to commercial real estate are high, but that is because there is greater risk and reward with it. If your goal is to own and manage your own commercial property, it is important to understand what it takes to achieve that goal. Having sufficient capital for the initial contribution and the ability to finance are two of the most important components.
Most investors play by the rules of the monopoly, ending up buying enough homes to subsequently convert them into a hotel, apartment buildings, industrial properties, warehouses, or other commercial real estate investments, but there are ways to do this. go straight to investing in CRE…
While most commercial real estate is expensive compared to residential real estate, affordable commercial real estate can be found in a number of markets across the country. It is a matter of deciding what type of asset you want and focusing on where the opportunities are for that asset class.
Knowing how to professionally manage real estate, especially on the scale of most commercial real estate investments, conduct a due diligenceand working with tenants is critical. If you don’t have the time or experience to support you, consider investing in one of the more affordable and passive methods of investing in CRE.