Office vs. Industrial vs. Apartments - Advice?

[James Nicholson]

I am getting starting in commercial investing. I have the ability to make a large down payment, so I've been looking at properties in the $1 million - $2 million range. So far I've been focusing on apartment buildings, but not finding cap rates to my liking. Should I instead consider offices or industrial properties? Seems like cap rates are a bit better for these types of properties. Any reason not to invest in offices or industrial spaces?

Any advice would be most welcome.

[Charles Lucenay]

I would only add a few things to what the others have posted here. First, have you considered retail properties at all (shopping centers)? They require less intensive management than apartments and from my experience tend to be a little less risky when it comes to vacancy than office/industrial. Second, do you intend to purchase the property using leverage (debt)? If so then your return on equity will be going down as you build equity in the property, in other words as you make payments of principle and interest you will build equity in the property therefore when you compare your annual return (what you get in rents-expenses) to the equity you have built that return (as a percentage) will decrease over time. My point here is you would need to either trade out of the property every several years trading up to something that will allow you to bring in more or you would need to refinance so that you could pull the equity out of that property and use it to invest in other things. I apologize if any of this post was unclear, if you have a question please let me know.