Interested in real estate investing but unsure how to begin? Commercial real estate has become a hot topic over the last decade. Its value has increased dramatically, and investors now consider it a viable asset class.
However, as you may know, too much information can sometimes work against you as a newbie. So, I hope the action steps in this article by Curt Ranta will give you a framework to get started quickly. Furthermore, by getting started and continuing on, you can avoid feeling overwhelmed and overcome other annoying beginner difficulties like analysis paralysis.
What Is Commercial Real Estate?
Property used for business purposes is known as commercial real estate (CRE). It is often bought and sold as a bundle, which includes everything necessary for the tenant to operate its business.
It is divided into two broad categories: commercial properties and mixed-use properties.
1. Commercial Properties
A commercial property consists of a single type of use. Most commonly, these properties have at least 1 commercial tenant. Examples of commercial properties include shopping malls, strip centers, office parks, industrial parks, self-storage, and warehouses.
2. Mixed Use Properties
A mixed-use property combines residential and commercial uses. These properties vary widely in different parts of the country. For example, in some states, it is legally permissible to build a house in the middle of a park, while in other states, it is prohibited. Mixed-use properties are often built near transit stations, schools, hospitals, parks, or high density residential neighborhoods. Many mixed-use properties combine commercial and residential tenants.
3. Types of Commercial Real Estate Properties:
Commercial properties are further classified into specific types dependent upon their usage and function. Some of the key properties are as follows:
- Office Space
- Retail Store
- Industrial Facility
- Hotels & Motels
- Airports
4. Ways to Get Started
There are three major categories of commercial real estate investment, points out Curt Ranta:
- Retail – This category includes retail stores, restaurants, shopping centers, gas stations, etc.
- Office – This category includes office buildings, medical offices, educational facilities, etc.
- Industrial – This category includes warehouses, distribution centers, factories, etc.
The first step is to understand what type of property works best for you. If you’re looking to start off small, then retail may work well for you. However, if you have experience investing in industrial properties, then you might want to consider starting out there.
Commercial real estate can be purchased in a variety of ways. You can buy individual pieces of property, or you can purchase entire portfolios of properties.
Common Mistakes To Avoid When Investing
Commercial real estate has become a hot investment option over the last decade. Many individuals are now turning their attention towards this lucrative asset class.
However, before you start investing in commercial real estate, you must first get educated. The following are some of the common mistakes that investors often make when purchasing commercial properties.
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Buying Property That Is Not Appropriate For Your Needs
If you’re not sure whether commercial real estate investment property is right for you, here are some questions to ask yourself before buying any type of property.
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Neglecting The Legalities of Purchasing A Property
Before you purchase commercial real estate, make sure you understand the legal requirements involved and have a lawyer review your contract. You want to steer clear of issues later on.
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Choosing An Unsuitable Location
When choosing where to invest in commercial real estate, think about what makes the most sense for your business. Consider factors such as proximity to customers, traffic patterns, potential tenants, and access to utilities. Remember that location isn’t everything; if your business doesn’t succeed, it may still be worth investing in.
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Failing To Plan Ahead And Set Up Financing
Make sure you plan ahead and set up financing before making a purchase. If you don’t, you could find yourself stuck paying high interest rates.
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Ignoring The Cost Of Maintenance
Commercial real estate requires maintenance, which includes things like landscaping, roof repairs, and pest control. Make sure you budget enough money to cover these costs.
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Being Overly Optimistic About Projections
Don’t assume that projections are accurate. Always do your own research.
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Lacking Proper Insurance Coverage
You need insurance coverage for commercial real estate investments, including liability coverage and workers’ compensation. Be sure to check out the details of the policy before signing anything.
Final Words
In conclusion, investing in commercial property can be lucrative, but it takes some research and preparation to ensure you’re making smart decisions. Curt Ranta wrote this article for beginners looking to learn more about investing in commercial property. It covers the basics of investing in commercial property and how to be a commercial property investor. They are also learning how the different roles can take part in the process.
