Types of Commercial Real Estate Investments
Commercial real estate investments are a way for you to save and increase your wealth. Real estate is immune to inflation (prices increase together with inflation), is backed by fundamentals (people need space to make business), and generally produces attractive returns. Commercial real estate can be defined as a real estate that is bigger than one house. So even if people live in, it can still be regarded as commercial as long as it consists of more than one house.
Other People Are Reading
-
Apartment Buildings
-
Apartments building are one way to start investing into commercial real estate. Apartment buildings are easy to find, banks are often willing to provide credit for them, and their cash flows from rent are usually strong. In investing in apartment buildings, remember, however, that you will need to spend money on administering them,
Offices and Warehouses
-
Offices and warehouses represent another type of commercial real estate investment. Their advantage is that their renting contracts are long-term (ranging from 5 to 20 years), and are based on the so-called triple lease, in which tenants pay for maintenance and repairs, property insurance, and the real estate taxes. This reduces the risk for their owners that the costs of administering the property will go up while the rent will stay the same..
-
Hotels and Resorts
-
Investing in this type of commercial real estate requires a certain degree of expertise. Usually, investors do not run the hotels they buy, but lease them to third-party operators. Running a hotel is difficult and requires qualified personnel. In addition, hotels and resorts prices depend on the tourism industry as well as on the property market.
Land Development
-
Buying land that isn't yet fit for building and constructing buildings on it is called land development. Land development can be very lucrative, but at the same time is also risky. Investors who put their money in this type of commercial real estate will risk that development costs (acquiring permits, construction material, workers' wages, etc.) will rise while the prices of finished building will not, cutting into their profit margins.
Retail Centers
-
Shopping malls and other retail centers represent another type of commercial real estate investment. Like offices and warehouses, retail centers are usually leased on a long-term triple-lease basis. As an investor you will not have to worry about taxes and other expenses going up, as your tenants will compensate you for any of those increases.
-
References
- Photo Credit montreal skysraper image by michele goglio from Fotolia.com
