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Introduction to Commercial Real Estate

office building

Commercial real estate at a glance

Commercial real estate (CRE) is any property used solely for business purposes, or one used as a place of employment rather than a place of residence. Commercial properties are typically leased to tenants who are looking to conduct business, and can include anything from hotels, hospitals, restaurants, convenience stores, office space, to all kinds of retail spaces.

Compared to other types of real estate, commercial real estate is often considered more stable mainly due to the flexibility of lease lengths, which can last for several years and more.

If you’re thinking about investing in commercial real estate, there are plenty of opportunities not only for investors, but for renters and real estate agents as well. But before diving right in, it’s a good idea to take some time to research on the basics of commercial real estate.

Difference between commercial and residential real estate

There are many differences between a residential and commercial real estate transaction. For one, it is more expensive, and there are often several partners involved. These partners typically hire an acquisition team, which is in charge of searching for more properties.

One of the primary advantages of commercial real estate is the leasing structure. A lease on a particular commercial building for example, can reach up to ten years or longer, translating to a very stable investment. The lease could be paid on a monthly basis, although there are situations wherein landlords require large payments in advance.

Similar to residential real estate, hiring a real estate agent who specializes in commercial real estate is a smart move if you plan to invest. You’ll want someone who has plenty of experience with commercial property transactions, as they’re already familiar with the process and will be able to get you the best deals available.

Selling a commercial property

While choosing the “For Sale by Owner” route in commercial real estate is an option, even this process is vastly different compared to same one in residential real estate. In order to get a good deal, you will need to know the right people and get in touch with other investors.

Getting the services of a real estate brokerage which specializes in commercial listings can make the process smoother, as they are often in contact with investors looking to purchase commercial properties. When you think about it, the money you spend hiring a brokerage is well worth it and will more than pay for itself, considering the amount of time and money you will save just by getting their services.

Investing in commercial properties

There are two main options available for those planning to invest in commercial real estate.

As previously mentioned, you can invest for rental purposes, taking advantage of the longer leases, which offer plenty of stability, even in unstable markets.

Another available option is to invest in property appreciation. Commercial buildings rely heavily on their location in order to earn, and real estate in prime locations is often limited, which means the value of commercial real estate tends to appreciate rapidly. If you’re planning to use appreciation as your investment however, keep in mind that this type of investment has more risks involved compared to the rental market.

Looking to invest in commercial real estate in St. Louis? Get in touch with us at Cardinal Realty Group today by calling 1.636.225.0385 or send an email to Hal(at)CardinalRealtyGroup(dotted)com