Insights

Growing Your Commercial Investment Portfolio

If you’re looking into investing in property or land, consider investing your money into commercial real estate. Investing in commercial properties typically has better net income returns than residential properties. Also, it’s been reported that commercial property gives a return of around 7-9% whereas the annual return of residential properties is only around 2-4%.

However, before making any investment you should consider all of your investment opportunities. Think clearly about where you should be investing, and which properties will give you maximum return with minimum risk. Here are some of the types of commercial properties you should consider investing in.

Land Investment

Investing in land comes with many benefits. Investing in raw land might be an extremely lucrative opportunity for someone who knows the market well. There are a number of ways of making money from this investment.

For example, if it is farmland, you can let local farmers use it to raise livestock or cultivate it. If it is wooded, then you can allow the logging companies to harvest on the property. The third option is a buy and hold strategy to sell the land to a real estate developer later.

The first two options will give you immediate profits, but with the third option, if you succeed in finding the right developer, then you might end up with an even greater profit.

Office Space

This investment is great if you are thinking about the long-term. Office spaces are in demand both in cities as well as small towns. If you invest in office space in a metropolitan area, then you can invest in multiple office units. Whereas in small towns, it’s best to opt for an office with a single tenant. The benefit of investing in commercial office property is that tenants normally sign long leases, and therefore it will be easy for you to look towards future projects.

Retail Space

Office space and retail space are similar when it comes to turning your investment into cash. However, while investing here, you have to keep watch on the location. Check that the retail space you are investing in has consistent foot traffic, or else you may be left without tenants for long stretches dragging down your profits.

Multi-Family Housing

Rental units are always in demand and currently, rental prices are increasing at a skyrocketing pace. So, investing in multi-family housing can generate consistent income for the investors. When investing in multi-family units, it’s also important to handle the property management tasks to keep your tenants happy.

Industrial Property

This includes everything right from a manufacturing facility to a warehouse to a research facility. But, when investing in industrial properties, you need to dive a bit deeper into the matter, as finding tenants for such properties can be a bit restrictive.

Storage Units

This is not a glamorous way of investing, but you can make good money. Plus, the advantage here is that you don’t have to invest only in large markets. Even in small towns, storage units can be a good investment. Again, the key here is researching and selecting the right location for optimal profits.

Types of Loans Available

Once you decide which commercial property you’d like to invest in, the next question will be of how to finance it? There are a number of options that a commercial broker can use to generate additional revenue and obtain loans.

Bridge Loans

 

This type of loan is temporary and gives you instant cash flow. The time limit for this loan is typically one year or until the time you find a desired long-term financing option. To obtain a bridge loan, you need to have a great credit history with enough cash in hand for the property’s existing expenses.

Joint Venture Loans

 

Private investment firms and investors normally offer this type of loan. You can avail this loan if neither party can obtain a proper loan on their own. This loan is done in partnership, and hence the name joint venture loans. It is a perfect solution when all the parties share equal profit.

Whichever commercial property you decide to invest in, there are risks and rewards. So, always ask yourself few things before investing. Like how much income will the property generate? In how much time? How long do you want to keep the property, and how much risk you want to take? The more research you do, the better chances of growing your commercial real estate portfolio. It’s also recommended that you partner with some professionals to get your commercial investment portfolio right.

Real Estate Purchase Loans

 

These are types of adjustable-rate or fixed-rate mortgages loans. Even for this kind of loan, you need to have a good credit history i.e. the score should be above 700 and have good savings in your personal as well as business accounts.

Hard Money Loans

 

The property should be listed as collateral when qualifying for hard money loans. This loan is given by private lenders and the interest rates are very high when compared to other commercial loans. These loans are temporary and should be available at a time of the essence, like for foreclosure of payment.