When investing in commercial real estate, you must consider a range of factors, including things such as the difficulty of owning and managing the property, the options that are available, and what you’re expected return on the investment would be.
Commercial properties have the potential to continue earning for you for years to come, however, you may be wondering which types of properties will work best for you. Let’s look at some of the most common property types to invest in.
Properties that have at least five residential units are considered commercial properties and are worth looking into as an investment. There are plenty of reasons that make apartment buildings a good option to consider, but the core tenet of these is that there will always be a need for housing. Simply put, everyone needs to have a place to live and there is almost always more demand than supply, but as with everything else in real estate, location is key.
Some other factors that make apartment buildings attractive investments include the ability to raise rents in most years, helping to offset increasing costs and/or increase profit. Apartment buildings can also work well as tax shelters, and they allow you to generate a substantial amount of cash flow in many cases.
There are many options when investing in office buildings. You can find single tenant buildings all the way up to corporate parks with multiple buildings and everything in between. Not to belabor a point, but location is again a key factor for investments in this property type. Choosing the right location will help to fill up any vacancies quickly, keeping the cash flow fairly consistent. Office tenants are also more likely to sign longer leases as compared to residential tenants, which means you won’t need to worry about filling the space for several years.
Self-storage facilities have a lot of potential, as well. They are a necessity, which means it is usually easy to fill them up. Evictions are easy if they become necessary when dealing with problem tenants. Storage facilities are easy to maintain and manage, and there are many experts consider self-storage to be economy-proof. When buying one of these facilities, you should opt for a facility that’s large enough to justify hiring a property manager. This will take all of the work out of your hands, while still generating a nice cash flow.
These are just a handful of the more common property types when it comes to investing in commercial real estate. Always research the specific property you are buying to be sure it’s a good fit for your investment style and make sure you have a trusted Lender that will help get you to the finish line.
H&O Capital Funding has helped countless real estate buyers, sellers, lessees and lessors achieve their goals. Our legacy is unwavering commitment to the communities we serve. Houlihan & O’Malley Commercial Real Estate Services specializes in four distinct, yet overlapping, areas of business: Commercial Brokerage services, Private Mortgage services, Appraisal Services and Advisory services.
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