Real estate investing can be one of the most stable forms of investing and a vital part of almost any investment portfolio. That being said, there are a number of different ways to invest in real estate, from purchasing residential properties to developing commercial ones. There are also a number of different ways to invest in commercial real estate. Here are three ways to invest in commercial real estate and how to find the one that is right for you.
Not everyone wants to develop or manage a commercial property, but land in and of itself has value, particularly when it is in an area ripe for development. For instance, you might buy an empty lot in an area ripe for gentrification. As property values rise, so does the value of your land. In the right market, you can sell the land for a significant profit without having to do a thing to it.
Direct purchase/pure play
In a direct purchase, you buy the property outright and own it in full. That also means, however, that you also have the full responsibility for taxes, insurance, care and maintenance. The exception to this is if you can find a triple net lease property. With a NNN property, the responsibility of paying taxes, maintenance, and building insurance lie with the tenant. In some cases, commercial investors simply hire a management company to manage the property for them. While this may eat into monthly profits, commercial investors can often pay off the property on rental income and then sell it for a tidy profit.
Real Estate Funds/ REIT
Real Estate Investment Trusts (REIT) and Real Estate Funds are both a type of mutual fund. They are a way to reap the benefits that come from investing in real estate, without having to take on the entire risk and liability of purchasing a property by yourself or with few partners. The benefits of investing in a REIT include lower investment entry costs and a highly liquid method of investing in real estate. Some REIT’s offer shares for as little as $500 and include properties ranging from commercial properties to shopping malls. Real Estate Funds offer professional and portfolio management support, but the funds gain value over time, so they do not provide the same short-term income that REITs might.