Ways To Invest In Commercial Real Estate

Ways To Invest In Commercial Real Estate

There’s more than one way to invest in commercial real estate, and it pays to know your options…

Only by knowing your full range of options are you able to make the most intelligent investment decisions, and create the optimal portfolio for the results you want most. Here are some of the types of commercial real estate now available for individual investors, as well as vehicles that deliver varying combinations of ease, safety, and returns.

Types of Commercial Real Estate to Invest in

●5+ unit multifamily properties

●Apartment buildings

●Industrial property

●Office buildings

●Retail real estate

●Hospitality

●Mixed use

Ways to Invest in Commercial Real Estate

For any of the above types of commercial property, there are a variety of vehicles and structures for investing.

Stocks & Publicly Traded REITs

Real estate was recently added to the S&P 500 as its own sector. There are many publicly traded real estate stocks and funds that can be invested in. This is one of the easiest ways to invest in anything. You buy a few stocks online, or more commonly have your broker do it on your behalf. The downside is that it offers no diversification or protection from major stock market corrections.

Solo Direct Investment in Commercial Real Estate

For those that don’t want their returns watered down and severely diluted by multiple levels of stockbrokers and funds and want to be clear about where their money is really going there is a direct investment in specific commercial properties. You can buy or build any of the property types above all by yourself. You get to make all the decisions, have full control of your assets and direct influence on their performance and value. You don’t have to share any of the profits either. Of course, for most this will mean taking on a substantial amount of debt and a big learning curve. It means all the risk too. There are ways to mitigate that with insurance and going for multi-tenant properties, but it is there.

Private Partnerships

The third alternative is the hybrid option of partnering up to invest directly in commercial real estate with other like-minded partners and peers. Here you get the benefits of solo direct investment such as more control, low volatility and more of the returns. You also get the benefits of partnerships. Ease of access, lower risk, greater potential for diversification. This way you can divide your capital across several properties, all with multiple tenants. Individuals can form their own partnerships with neighbors or family, or partner up with commercial real estate investment experts and professional asset managers who can handle the details, while you receive passive returns. There are multiple ways to structure these partnerships with LLCs being among the most common. Members can choose to share responsibilities and the workload or to participate in a syndication as a limited partner without the liability and have one managing member handle all of the acquisition paperwork and negotiations, daily supervision, remodeling and leasing and preparing for exits.

In addition to these options is the ability to invest through several tax saving structures which help defer or eliminate income and capital gains taxes on real estate investments. Look out for more details on how to use these on our blog later this month and make sure you are subscribed to our email newsletter to get notified of the latest commercial real estate news and tips.