Investing in commercial real estate is one of the best ways to produce substantial profits or generate passive income. It can also lead to multiple cash streams, diminished competition, and risk diversification.
However, the cost of entry can be steep for new investors. Owning a small office building or apartment complex may prove to be beyond the reach of a modest real estate investor.
Whether you happen to be a residential real estate investor thinking of taking your investment to the next level or completely new to the property investment world, we’ve compiled several tips to help you out:
Real estate crowdfunding platforms
Don’t have the money or experience to invest commercially? With real estate crowdfunding platforms, you can buy property with less work and risk. These platforms enable real estate developers to connect with investors interested in financing upcoming projects (buying “shares”), either through debt or equity, provided you are an accredited investor.
This means one can own a piece of commercial real estate that they wouldn’t have been able to finance or manage on their own. A few sites you can try out are RealCrowd, CrowdStreet, Patch of Land, Realty Mogul, PeerStreet, and Sharestates.
Real estate investment trusts (REITs)
Some investors don’t want the hassle of finding, buying, and managing properties. Neither are they keen on the prep work needed to go into crowdfunding. For such investors, real estate investment trusts or REITs are another option.
An REIT is a company that owns and operates income-generating properties. They invest in a wide range of commercial real estate like office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and cell towers.
REITs allow individual investors a share of the company’s profit without the pressure of actually having to buy commercial real estate themselves.
The downside to REITs is a lack of liquidity, share value transparency, and conflicts of interest. Investors also need to watch out for fees that are too high. It’s also possible to encounter fraudulent groups who will attempt to sell REITs without being registered with the Securities and Exchange Commission.
House hacking is a smaller and simpler way of getting into the world of commercial real estate. Simply put, it’s combining buying a primary residence and owning rental properties. An investor can buy a multifamily commercial property (duplex, triplex, fourplex), live in one of the units, and rent out the rest.
Real estate investors can pay their own mortgage with the rental payments from tenants. This translates to living in the house for free! Moreover, house hacking is a good way to gain experience in real estate investing, especially when it comes to learning what it’s like to be a landlord.
There are plenty of ways to invest in commercial real estate with a limited budget. What’s important is performing due diligence before pushing through with any of the methods mentioned above.
Need help in getting into the world of commercial real estate?
We at Cardinal Realty Group are ready to help! We are a group of well-connected and respected Realtors ready to help you reach your goals. Call 636.225.0385 or send an email to Hal(at)CardinalRealtyGroup(dotted)com today!