There are some excellent prospects for commercial real estate. Just to name a few, there are great investment opportunities in commercial real estate that includes retail, office space, industrial, land for sale, multi-family properties, and more.
When you invest in real estate, as Barbara Cochran of “Shark Tank” states, “real estate is a great way to build wealth if you have stick-to-itiveness. Investing in real estate is a great way to build wealth. Investing in commercial real estate is known to produce high-income benefits.”
Commercial real estate investments also allow you to have more financial control with your investment portfolio as opposed to Wall Street investments or other types of less controlled investments.
As an asset class, commercial real estate does not move or impact your investment rates when there is a dip in the stock market. In other words, personal or direct commercial real estate investments are not publicly traded, therefore they are hardly impacted by unfavorable financial events.
Commercial Diversified Portfolio
Commercial real estate consists of five main categories that provide wealth as a diversified portfolio:
1. Industrial Buildings
This category includes warehouse and distribution buildings. Your investment space is generally between thousands of square feet to hundreds of thousands of square feet. They are designed to hold warehouse and distribution inventory.
This means they are designed with loading docks, huge parking lots, and wide doors for semi-trailers and trucks of varying sizes. Small office space is also included in these investment structures.
2. Manufacturing Buildings
Goods and materials are housed in these facilities made from specialized equipment. Your manufacturing real estate investment is a heavy duty of long-term wealth. Manufacturing buildings house vast electrical power, specialized water lines, HVAC systems, floor drains, storage tanks, cranes, specialized vehicles that move from one end of the building to another, and heavy-duty plumbing works.
3. Refrigeration/Cold Storage Buildings
This facility investment is generally used for food products and distribution. Your investment in this structure is equipped with a vast freezer for refrigeration and cold storage space.
Other refrigerated buildings are used to house certain furniture piece (wooden/leather), household appliances, stamps, coins, art collections, wine, written works, historical photos, certain musical instruments, electronics, pharmaceuticals, and more.
4. Mixed-Use or Special Purpose Buildings
These investment structures are designed for a wide range of uses. They vary in size and are used for office space, small manufacturing investments, retail storage, home improvement centers, medical centers, movie theaters, sports arenas, and more.
Mixed-use commercial properties continue to grow in demand. These properties for mixed use can include a business on the first floor and living apartments on the floors above.
5. Commercial Multi-family Buildings
As a solid investment property, commercial multi-family properties consists of 5 plus units with four floors and higher. The buildings include garden apartments and mid/high-rise apartments.
Your investment in these structures is a continual cash-flow income because there are multiple tenants with a continued tenancy to cover operating costs. Most neophyte investors opt for multifamily properties as an introduction into the commercial real estate investment arena.
Commercial Real Estate Growth
Commercial real estate in Dayton, Ohio involves standard building classification: A, B, and C. Newly built buildings (Class A) are prestigious investments, older buildings that may need minor repairs and upgrades (Class B), or commercial buildings (Class C) that require a larger investment for renovations and infrastructure upgrades. However, your investment is yield is higher due to a higher vacancy rate due to one tenant who may stay in a Class C structure for years.
With the growth of a city, investing in the above commercial real estate models, your investment would yield higher gains because these properties attract a higher number of tenants. The more tenants you have and the longer they rent from you, greater will be your income. Each of these types of commercial buildings, they have more favorable tenancies.
Benefits of Investing in Commercial Real Estate
Tenants are known to sign up to a 5 year and beyond lease agreement. Wealthy entrepreneurs have noted during past recessions, their rental property cash flow remained the same because of their tenants remaining in place and under a lease.
Commercial properties can be taken over quickly on a short-term basis than residential homes. For the Dayton area, properties are most often located in high-traffic locations which are attractive to tenants. Commercial tenants are more readily available to renew their leases and busy neighborhoods for commercial zoning are attractive to new tenants.
Your Rate of Return
As you can see from the various asset producing commercial real estate investment classes, you as an investor will have varying rates of return. Currently, part of the higher yield of commercial real estate assets includes self-storage facilities. They are trading around a 10% + cap rate. A good cap rate is generally 4% or higher.
However, at the lower end of the commercial real estate spectrum are apartments, retail, industrial and office spaces. For your investments in these classes, they are trading at single-digit rates of return. When we say lower, as an investor you are slightly beneath 10% which is still a great investment on your return.
Additionally, commercial real estate properties are a niche personal investment because there are no commercial space competitors and investors in this class are lessened. Unlike residential real estate, your income from commercial properties is related to adaptable square footage.
Support in Investing in Commercial Real Estate
If you are hesitant in jumping into the commercial real estate investment market, this arena is no longer your grandparents’ investment. Years ago, commercial real estate investments would cost millions. However, the Obama Administration in 2012 passes the Jumpstart Our Business Startups Act (JOBS) allowing friendly financial support in investing in commercial real estate.
The JOBS Act allows individuals and their partners to invest in commercial properties with only a few thousand dollars. The JOBS Act opened the door for investors to buy shares in real estate investment trusts (REIT). Your REIT return will be in the form of property earnings.
Just remember that not all forms of commercial real estate are equal. Although commercial real estate has been proven to be the most profitable form of investment, it is imperative that you do your homework and purchase into the right commercial property. Whether you are saving for retirement or for a child’s college fund, consider diversifying your investment portfolio with commercial real estate investments.