Deciding to pursue commercial real estate investing is a big decision to make. You will need to consider several factors before choosing this path, as there are many steps involved in being a successful commercial real estate investor. For all the things you can’t handle yourself, CTG Real Estate Services is there to help.
Our commercial real estate company has worked with many clients who were interested in commercial real estate investments and needed the guidance of a professional to get started. If you’re looking to turn a profit on a commercial real estate building, learn about commercial real estate investing basics below.
What to Know Before Investing in Commercial Real Estate
Often, those who are considering investing in commercial real estate ask, “Should I invest in commercial real estate? What are the benefits of investing in commercial real estate?”
When done correctly, investing in commercial real estate can be incredibly profitable. From 1996 to 2016, commercial real estate investing brought in an average profit of 10.1 percent to investors, and estimated 2018 and 2019 profits sit around 6 percent. The industry is expected to show continued growth for years to come.
Commercial real estate generally holds a higher value than residential real estate, as the income a commercial building produces is directly related to its usable square footage. Tenants who lease commercial real estate space generally sign longer leases, ensuring a steady profit for owners of commercial real estate.
That’s not to say commercial investment in real estate is right for everyone. Anyone considering a commercial real estate investment needs to do diligent preparation and research to determine whether it’s the right path for them. They should consider their personal income and available credit, investments funds available, joint venture opportunities, the areas in which they hope to buy commercial buildings, and the amount of renovation they are comfortable with. This is called your “asset criteria.” Keep in mind that many major lenders will require a higher down payment than if you were purchasing residential real estate.
Once you have done your market research, then you can determine if commercial real estate is a good investment for you.
How to Invest in Commercial Real Estate
If you are ready to move forward with your commercial real estate investments, there are a few questions you need to ask yourself. These will determine the steps you need to take in your personal investment journey.
1. Do I want to flip or lease the building I buy?
Most commercial real estate investors choose to renovate low-class buildings for the maximum profit — that is, taking a building that is lacking in aesthetic and functionality and completing the major renovations it needs. Investors should determine whether they plan to sell this building after renovation or lease it out to prospective tenants.
By far, the most popular path is leasing, as it provides a steady income for the investor. However, as determined by the terms of the lease, a building owner may have certain responsibilities. Your decision to lease a building for maximum profit will dictate some of your asset criteria.
2. What are my asset criteria?
Your asset criteria are the aspects that you will consider when locating a potential space for your commercial real estate investment. These will dictate what kind of space you end up investing in, based on your desires for:
- Potential tenants
- Building class
- Budget (purchasing and renovating costs)
- Possible amenities
3. Do I want to work with a real estate investment company or handle the steps on my own?
If you are new to commercial real estate investing, you may not be aware of the all the important steps of renovating and leasing a commercial space for the maximum profit possible. This is where a commercial real estate company like CTG Real Estate Services is helpful. These professionals can guide you through every step of the locating, purchasing, renovating and managing processes to ensure you (and your future tenants) are protected from every potential complication that comes with owning and managing a commercial space.
If you choose to handle the steps of commercial real estate investing on your own, you will need to recognize all the responsibilities of doing so — and the extra costs and time associated with them.
Once you have answered these questions, you can move forward with the knowledge of how to start investing in commercial real estate in the way that’s best for you.
How CTG Real Estate Services Can Help
Still unsure how to invest in commercial real estate? The professionals at CTG Real Estate Services can always assist you.
Our professionals are experienced in helping clients find the right commercial space for their needs — whether it’s as a potential investor, buyer or tenant. Chris Gardner and his team can explain all of the steps that go into setting up a functional commercial space and, unlike other professionals, can guide you through all of the steps after purchase, if you desire. Our assistance doesn’t have to end at the sale — which is why many first-time commercial real estate investors contact our company for help.
Our unique turnkey solutions can help you take a commercial real estate space to its best state ever, turning the profit that you desire when you lease it out to tenants or sell it to another owner. To learn more about these services, please schedule a consult with our real estate company today.