A Guide To Investing in Commercial Real Estate
Investing in commercial real estate is an excellent way to diversify your assets portfolio, but it isn't something you can simply jump into. First, you need to ensure you understand some of the basics of commercial property investments.
Direct vs. Indirect Investment
There are two types of commercial real estate investment methods: direct and indirect. While experienced investors and developers like Angelo Ingrassia of Rochester NY, tend to use both methods, someone new to the game should try one at a time until they get their footing.
Direct investments allow for flexibility in which type of property you buy, allow you to control the decisions, and provides you with tax benefits. However, it also requires you to work hard, which means you need to have a large amount of capital, and creates a liquid investment that may be hard to sell if you decide direct investing is not for you. Direct investing is best for people who already have high net worth and aren't afraid to get their hands dirty or take a risk.
Indirect investments allow you to invest much smaller amounts of capital, create a passive income stream, diversify your investment portfolio instantly, and have liquid investments. On the other hand, though, they also don't let you have any say in which properties you purchase, don't give you an opportunity to make important decisions, and mean that you'll be taxed at regular tax rates. This is a good option for investors who want to start small or who want to invest in cities they don't actually live in.
The Right Team
Investing in commercial property isn't something you can do alone. You'll need the right people on your side.
Attorney – An attorney ensures your contracts are airtight, offers legal advice, and can help you should a lawsuit arise.
Commercial Real Estate Agent – Commercial real estate agents help match you with properties that meet your investment needs and may even help you find tenants for your property.
Contractor – Keep someone on your team who can provide repairs and maintenance as needed for your tenants.
Insurance Agent – Your agent ensures you have a comprehensive insurance package that covers damage, natural disasters, injuries on the property, and more.
Lenders – Lenders help you find the financing you need to secure your property.
You may also consider a property management company that can help you handle daily tasks like speaking with tenants, collecting rent, and negotiating new leases.
Types of Commercial Real Estate
There are five main types of commercial real estate. Offices are the most common and range from single-tenant spaces to skyscrapers that cater to dozens of different companies. They typically fall into three categories: newly built or extensively renovated spaces, older buildings that need minor repairs or upgrades, or buildings that need extensive redevelopment.
The other types are retail, industrial, multifamily, and special-purpose properties. Retail ranges from strip malls to restaurants, while industrial properties cover warehouses and manufacturing sites. Multifamily properties are usually apartment complexes or high-rise condos, and special-purpose properties include those for specific purposes, such as car washes or schools. The type of property you own will determine the insurance you need, however, but many insurance providers, like those you can find when you click here, offer insurance for everything from hotels to warehouses.
Being well-equipped with information about commercial property investment ensures you make the best decision for your investment needs. Consider your overall goals to help you determine which direction to go.
