7 Different Methods of Investing in Commercial Real Estate
Commercial real estate is as varied as it is profitable. There are many different kinds of commercial real estate that we encounter every day.
Commercial property includes:
- Office Space
- Retail Businesses
- Hospitality Businesses
- Industrial Facilities
- Multifamily Living Spaces (ex: Apartment Complexes)
And the fact that these properties are so varied and so common means that they are a great opportunity for investors. These projects can be quite large — making it extremely difficult for a singular entity to fund the entire project.
This leaves the door open to investors. And those looking to make their money work for them have a handful of choices for doing so.
Are you looking to create a passive form of income by investing in commercial real estate?
Here are 7 ways to invest in commercial real estate:
- Purchase a Rental Property
- Real Estate Investment Trust (REITs)
- Real Estate Investment Platforms
- Mutual Funds
- Exchange-Traded Fund (ETF)
- Invest in a Local Commercial Real Estate Company
1. Purchase a Rental Property
The most direct way to invest in commercial real estate is to purchase a property of your own. This is the most hands-on method of investing but it provides the largest potential for returns.
Commercial real estate properties can either be sectioned off to include multiple facilities, or house a singular entity. This will necessitate the services of a property manager to make sure your tenant remains happy.
The goal is to keep your units occupied at all times to provide a constant source of income.
2. Real Estate Investment Trust (REITs)
REITs are organizations that own and operate large pieces of commercial real estate. This includes properties such as hospitals, office buildings, shopping centers, and more. An investor doesn’t actually own any part of these properties, instead pooling their money together with other investors to fund the project.
Most REITs are traded publicly and offer a steady stream of income for investors. There is no associated management or upkeep associated with the properties. These liquid investments are easy to transfer back and forth.
3. Real Estate Investment Platforms
Real estate developers often have dreams that are much larger than their available funds. This is where you as an investor come in. But how do you find these projects that are in need of a cash injection?
Various platforms such as EquityMultiple connect developers in need of financial assistance with investors ready to give it to them. This is a great way to get in on the ground floor of new developments. However, their lower limit of potential investments is quite high. But accredited investors can use these services to start new projects.
This is a bit of a mix of real estate investment platforms and REITs. These services help potential investors pool their money to support new developments in need of financial assistance.
Real estate investment platforms might have a high minimum contribution, but investors are able to make use of crowdfunded projects for as low as $500.
5. Mutual Funds
Another low-risk option for investing in commercial real estate is to put your money into a mutual fund. These are managed by professional investment managers to provide the best return for investors.
You can research the past performance of various available mutual funds to find one that provides the type of return you desire. These are advantageous because they allow for smaller investments.
This low entry-point as well as the fact that they are managed by professionals makes them a great option to create passive income in a low-risk way.
6. Exchange-Traded Fund (ETF)
An exchange-traded fund (ETF) is an investment opportunity that is traded much like regular stocks. It is similar to a mutual fund in that it is a low-risk, low-cost option.
ETFs are actually a grouping of either bonds or stocks. This creates a singular fund that has a good amount of diversification, which also helps reduce the risk associated with investing.
7. Invest in a Local Commercial Real Estate Company
But if it’s a hands-on experience you’re looking for, you can always invest in a local Nashville real estate company. This gives you the ability to visit new projects in-person and see exactly where your investments are being used.
But this is more of a novelty as opposed to an actual affordance of authority. The real estate company will most likely proceed as before.
Investing in Nashville commercial real estate is a great way to diversify your portfolio and create new lanes of passive income. Southeast Venture has developed, managed, and designed successful commercial real estate throughout the Nashville area.
Do you need help navigating the local Nashville commercial real estate market?