Investing in different types of commercial real estate comes with different benefits and obstacles. Because of this, some people will do better to invest in one type over another. Below are the four most common types of commercial real estate.
Industrial buildings are any kind of structure that is used for large businesses, mostly in the fields of manufacturing and research. Some of these businesses include warehouses, manufacturing sites, research and development, refineries, and buildings that contain assembly lines. This category does not include large box or chain stores, even though the buildings might be roughly the same size; in the end, it is what the building is used for, not the size, that determines which category it falls into.
Since these buildings are usually not near residential lots or other businesses, the cost of these buildings is usually lower than the average business lot. This makes it a good investment for those who do not have a lot of money to invest. This property is best for several investors to work on together.
Multifamily lots are those used primarily for apartment buildings, condos, and the like. Generally, any lot in which people live, but do not own themselves (rent or lease) will count as a multifamily commercial lot.
These are some of the easiest lots for new investors. Sometimes, these properties are bought with normal home mortgages. Apartment building complexes might have other loans available. Once the lot is rented out, owners should use the profits to pay off the mortgage first. Once the mortgage is paid off, most of the rent payments will be pure profit!
Office real estate lots are exactly what they sound like– office buildings. These can be in small one-story buildings in the suburbs or high skyscrapers in the city.
This investment is great for people who have some experience already. Leases for office spaces are often longer than they are for homes, lasting several years at a time. Like residential lots, once the mortgage on the building is paid off, the lease payments should be all profit.
Retail space is used for any business, no matter the size or location. Because of this, the price point for renting, leasing, and buying this type of property can vary greatly between buildings.
High-experience investors should invest in retail– not beginners. Usually, these lots are rented out to several different businesses (think malls). This can be complicated for beginners to work with.
Before investing in or buying a new commercial lot, think about how experienced you are. The more experience you have, the more types of properties you can confidently invest in!
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