If you are a savvy investor, you can move a step up from residential property investments to commercial real estate investments. Most people do not think that they could be rich enough to own an office building or a construction site. However, you could be wrong. Thanks to modern financial tools and the internet, commercial real estate investments are not as esoteric as they used to be. If you are an aspiring commercial real estate investor, here are some tips to follow:
Use a REIT
A Real Estate Investment Trust, abbreviated as a REIT, is a real estate investment tool created by Congress in the 60s. It’s sort of an investment vehicle than small-time investors can use to get in on big-time commercial property deals. You don’t need to be a millionaire to participate. You can use some savings to buy interest in the commercial marketplace using a REIT. Once you do, the REIT will handle the management of the commercial deals you have invested in. So you won’t have to spend time learning about how to manage a large commercial property.
REITs are very helpful because commercial real estate deals are very complex. That’s why only seasoned and professional investors are recommended to dabble in these. REITs allow even the most casual investor to benefit from commercial property without having to worry about saving for huge capitals or hiring legal experts.
With a REIT, you can be a shareholder of lucrative commercial real estate like industrial buildings, malls, office skyscrapers, hotels and so on. REITs are regulated and are required to distribute most of the income from deals as dividends to investors like you.
Learn the Ins and Outs of Commercial Real Estate
Even if you use a REIT, becoming a savvy commercial real estate investor takes some work. Remember, commercial deals are complex. So, you need to know what you are doing. You can start by learning certain lingo attached to commercial real estate deals. For example, even if you are a seasoned regular investor, you might not understand what Loan-to-Value (LTV) or Vacancy Rate involved in commercial deals are. Spend some time learning these things. Then you will know the right questions to ask. Do not approach commercial real estate deals the same way as you would buying a new apartment.
Research the Neighborhood
In some aspects, investing in commercial property is the same as investing in regular real estate. For example, as always, you will have to thoroughly research the neighborhood. For example, the neighborhood is very important when you are investing in an apartment building or a new office building. These properties would require easy access to transportation, facilities, shopping centers and safe areas with low crime rates. When you are investing in a building at an area you are unfamiliar with, it’s important to know these facts.
Do not begin to invest in commercial real estate without seeking advice from experienced investors and experts. If possible, find an experienced investor to shadow or tag along with until you fully understand the nature of commercial real estate.