Investing in commercial real estate is an excellent way to generate passive outside income, there are plenty of millionaires that got their start in real estate. The right investment can yield an excellent return but even commercial real estate is not without risks. You need to understand these risks before you start pouring money into an investment.
Short and Long Term Investments
There are plenty of reasons to invest in commercial real estate chiefly is that it offers both short and long term gains. In the short term there can be immediate cash flow coming in from the property. In the long term, commercial properties appreciate in value and you can end up with a huge return when it comes time to sell. One of the many perks of investing in commercial properties like apartment buildings for example is that even though all of your units aren’t rented you can still make money on your investment. Here are some other reasons to invest in commercial real estate.
Different Types of Property
Commercial real estate gives you plenty of options as to what kinds of properties you can invest in, there are shopping malls, apartment complexes, and office buildings. Essentially if a building has more than four units it is considered commercial property. There are other buildings that fall into the category of commercial real estate and they include mobile home parks, RV parks and commercial centers.
Financing commercial real estate is vastly different than buying your home. Very few investors use all of their own money to purchase a property. In most cases they will work with a lender. If that is the route you take you will need to let the lender know the type of property and how the investment is going to make you money. It is similar to buying a business. You will need a larger down payment than you would to buy a house. Investment properties usually require 25% down whereas your home you can purchase with as little as 5% down.
Any property you are considering needs to have an assessment done along with an inspection. Also you will want to work with an attorney to make sure that there are no unexpected surprises to come up later with the title. Once all of that is squared away then consider several different lenders, to get the best mortgage rates. There are also pools of investors that invest in commercial property that you can work with.
Commercial real estate is a valuable investment but like any investment it comes with risks so do your research first!