Investing in commercial real estate is relatively complex and requires specialized knowledge to do it well, but it can be a fantastic addition to your portfolio. This is a way for self-directed investors to participate directly in the real estate sector.
As with any real estate investment, there are a couple different ways you can potentially make money. One is through the appreciation of the property. If you’re able to sell it for more that you paid for it, that’s appreciation. The second way is through ongoing income through renting the space out to business tenants. This is the primary method of making money with commercial properties and it can provide steady income to your portfolio.
- Direct participation in the real estate sector (diversification)
- Potential for ongoing monthly income
- Compared to residential real estate, the landlord has fewer responsibilities (tenants are responsible for most costs of maintenance)
- Tenants tend to stay for long periods of time
- Regulations tend to be more favorable to the landlord vs. residential units (easier to get rid of non-paying tenants)
- Owning a single property introduces more risk than owning many units via a REIT or similar investment
- Depending on the location, it could be more difficult to acquire new tenants than with a residential property
- Often requires a significant investment of funds
- Requires ongoing supervision unless outsourced to a property management company (at additional cost)
- Requires specialized knowledge to get started
If this all sounds great and you’d like to learn more, click the link below: