Investing in Commercial Real Estate

Most commercial investors started out as rental property owners, builders, developers or something like that. I have mentioned before that commerical real estate investing is a little more difficult to start with.

Basically commercial real estate is anything non-residential or more than 4 units. I consider apartment buildings, no matter how many units, to be residential but technically if it's more than 4 units it is considered commercial. I personally define commercial real estate as any real estate that doesn't house people. But for the sake of splitting hairs, on this website I'll stick to the traditional definition.

I mentioned it on the Find A Property page and I'll mention it here, before investing in commercial real estate, pick up the book Investing in Income Properties. It is a must read!

Let's start by talking about some of the various types of commerical real estate investing. If you are going to be investing in commercial real estate, you need to know some of the ins and outs of the various types of commercial properties. We'll begin with apartment investing or multi-family properties. As I just discussed an apartment is considered to be anything over 5 units. The first apartment I owned was a 6 unit property. I learned quickly that in my town different rules apply for multi-family structures versus single family rentals. You will find city codes and ordinances are a little different for apartments versus single family residences. So be aware of that. Read this for more information on apartment investing.

Storage units are a great commercial investment. Storage units (or self-storage units) are buildings where people store things. It's like renting a garage space. Storage units are very popular due to their low maintenance and high return.

Mobile Home parks are another popular type of commercial property. You can basically invest two ways: rent out the mobile homes or just rent out the pad. Renting out the pad is probably the easier way to invest. Mobile homes are always in high demand due to the affordability of them.

Investing in office buildings can be a very lucrative way to invest in commercial real estate. Retail is simply renting spaces to stores where consumers shop. Office space would be like a medical office, accountant or attorney, or something of the sort. Retail and office space has one major pro and one major con. The pro is that your tenants tend to not move out as much. Think about it, businesses typically like to stay put so customers learn their location. The major negative is that a vacancy is harder to fill. There aren't tons and tons of businesses being started each day so you have a smaller market of tenants. Industrial properties are another popular form and are very similar to renting offices or retail space. Industrial properties are typically large warehouses or buildings where manufacturing takes place.

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