Investing in Commercial Real Estate, 4 different types of co..

Investing in Commercial Real Estate, 4 different types of commercial Real Estate.

There are 4 types of commercial real estate spaces that you can invest in. There’s retail, industrial, multi-family and office.

Number 1: Multi-Family/Multi-Residential

One of the benefits of this is consistent just like single family everyone needs a place to live. Certain aspects of commercial real estate you can have high vacancy, with apartments not that it can happen it’s just very rare to have an apartment building that’s 50% vacant. Because you will always get word of mouth promotion.

Another benefit with this type of commercial space is the real estate turn overrate. When you turn over a suite (when somebody moves out) and a new person comes in.) most of the time you don’t have to do a lot of work and reinvesting. If it’s really old, you’ll just do some construction and put $10,000 or $15,000 depending on the market you’re in. Most of the time if it’s just tenant to tenant you’ll just do the carpet, paint it’s really all you need.


Number 2: Office Space

Office property is like a bond. The valuation of real estate is the cash flow that’s coming into that building. For office those cash flow in theory can be more consistent. Office space also gets you a lot of prepaid rent in security deposit. When you buy an office space you are literally buying the cash flow of whatever company that moves in.

Like most real estate is somewhat of an inflation hedge. Typically in an office what you have is step ups in the rent. For instance one year you’ll be paying $20 net square foot per year. Then the NEXT year you’ll be paying $22 then next year you’ll be paying $24. That’s why due diligence is so important because this is built-in in a lot of the leases. These increases in rent per year is your inflation hedge. An inflation hedge is an investment intended to protect the investor against a decrease in the purchasing power of money.

Another pro with office is that they have what it’s called triple net leases. What this means that the tenant is responsible for all the cost such as the net rent, taxes, maintenance AND insurance. They pay everything the landlord basically just picks up the check.

Number 3: Industrial Real Estate

Some of the pro’s of the industrial unlike office the capital requirements are actually low. Often times the concrete pad with 4 walls and a ceiling. You really don’t have to do too much, and the tenants that you do have they really don’t want too much done. Think about your distribution centers, your warehouses everyone wants to get their hands on industrial real because of whatever going on with Amazon, E-Commerce. These companies need space so you don’t have to do no construction because they will fill in the space since THEY NEED space.

Number 4: Retail Space

One of the benefits with retail you can have a triple net tenant. Just like industrial you are not responsible for paying for taxes, maintenance and insurance. If you can have a tenant that has good credit worthiness and is a solid tenant like a Starbucks. Then you can definitely have a good investment over a long period of time. Just any retailers that you know that has a good profit margin can be a great investment for you commercial real estate space.