You’re about to discover the 5 best commercial real estate types for individual investors. Many of the iconic commercial properties you drive by everyday are owned or controlled by larger investment firms, such as real Estate Investment Trusts (REITs), Private Equity Funds, Trusts and other large institutional investors. Competing against those folks can be difficult because they have virtually unlimited amounts of cash and only require a small return on their investment dollar. For individual investors like you and me, we need larger returns with less capital. So what properties are best for people like us? Find out in this video, “The 5 Best Commercial Real Estate Types for Individual Investors”.
Here’s a summary of what you learned in the video above:
5 Best Commercial Real Estate Types for Individual Investors
1.Apartments (0:48)
- 5 units and greater are considered commercial real estate
Why Invest in Apartments?
- Everyone needs a place to live
- You can generate a large amount of Cash flow
- Force appreciation by increasing rents or reducing expenses
- Apartments produce great tax shelters
- As you make your mortgage payments you reduce your principal and create equity
- You create wealth by increasing your equity and cash flow
- Easiest commercial real estate to get into
SWEETSPOT of Apartments:
- Between $500,000 and $5 million
- Not worth it to go below
- Too much competition above
CONS for Apartment Investing
- If your neighboring developers are building new apartments
- New builds will attract your buildings ability to attract new tenants
- Sometimes people do bad deals
2.Self-Storage (3:52)
- Self storage are commercial buildings with individual rooms where people store their stuff
- They come in different sizes
- Also include boats and rvs stored
WHY Invest in Self-Storage?
- Same as Apartments but you are missing two things that are to your advantage
- Missing tenants (easy evictions, not labor intensive)
- Missing Toilet Repairs (Less maintenance)
- Creates cash flow
- Force Appreciation
- Experts consider Self-storage economy proof
Sweet Spot of Self Storage
- Buy a large enough self-storage facility to be able to employ a property manager
- Do not do this yourself
Cons of Investing in Self-Storage:
- If the neighborhood has decreased in value your facility might not be desirable
- Location is extremely important
- It can take a while to occupy all of the units
3.Shopping Centers (7:38)
- Strip centers large or small
- Shopping malls indoors or outdoors
WHY Invest in Shopping Centers?
- Stability
- Most tenants sign a 5-20 year lease
Sweet Spot of Shopping Centers:
- Buy Small, start small, and scale up
Cons of Shopping Centers:
- Capital Intensive
- Need lots of cash
- If a major tenant leaves It can take up to 30% of the income
- You will still have to pay mortgage as you build up for the next tenant
4.Office Buildings (10:13)
- Single building with one tenant all the way up to a skyscraper that’s 80 floors and dozens of tenants
WHY Do We Invest in Office Buildings?
- When the economy is booming their rents can be astronomical
- Can make a lot of money by holding onto them for a long period of time
Sweet Spot of Investing in Office Buildings:
- Start small, buy an office building with multiple tenants with long term leases
- Cons of Investing in Office Buildings:
- They depend on the economy
- If the economy goes down the office building goes down
5.Mobile Home Parks (12:20)
- You either own the mobile home park and the tenants bring the mobile home
- You own both the park and the homes and rent out both
- It is better to own only the mobile home park aka dirt because less maintenance and expenses
WHY Invest in Mobile Home Parks
- They produce cash flow
- Affordable housing demand is great
- You won’t see many new ones being built
- Tenants tend to stay a very long time
- Most mobile home parks are seller financed
Sweet Spot of Investing in Mobile Home Parks:
- Buy a mobile home park that is big enough to hire a property manager
Cons of Investing in Mobile Home Parks:
- They have a negative reputation
- Financing for mobile home parks is difficult to get
Conclusion:
- F.O.C.U.S
Follow One Course Until Successful
- Choose one route to go and stick with it
- Weigh the probability and the size of the investment
Hello Peter:
I’m considering buying 7 apartments in a Condominium complex. Is this considered a commercial purchase?
Yes
This is all great information, I am curious how the tokenization of commercial properties will affect all of these different real estate industries in the future.
This is really appreciated that you have presented this data over here, I love all the information shared. It will be very helpful to understand the 5 best commercial real estate types for individual investor’s Great post to share!!
Very enlightening! I enjoyed that!
Thank you so much the information you sheared was positive and clear for any new investor to carefully consider and make the right choice I need to learn more you are the best.
I like how you said that shopping centers are a relatively stable commercial real estate investment. My sister recently came into a lot of money, and she wants to use it for investing purposes. I’ll share this information with her so that she can look further into her options for buying commercial property to rent out to businesses who could be interested.
Looking to start an event space leasing business. Should I purchase a building or lease a space?
Thank you so much for this useful information. You just don’t know how much you help me.
I much prefer informative articles like this to that high brow literature.
I am just getting starting in investing in property of any kind.
In listening to your video I found that the “self storage” would work for me but how do I find these properties! Not s question just thinking out loud. I have s lot to learn for now.
I am subscribing to your site as you’ve made it very simple in understanding the various kinds of property. Thank you
Peter ,
Thank you, Your teaching style is so easy to understand . More info for free than 1500.00 boot camps!
excellent, very educative.
thx
I have find an apartment build in Baltimore Md selling for $800,000. How can I speak wirh your staff about this commercial property deal. My name is Michael and my phone number is 443-709-7615
Excellent information. Thank for the video.
What creative ways could a person come up with the 25% down payment of the loan besides using the master lease aggreement? Sry this is a question and not a comment.
Raise money from private sources. The seller may agree to give a credit at closing (or a seller held second mortgage).
Thank you for all your videos..its very easy to understand and makes me to get very excited to start investing in CRE, but I have a lot do learn first.
Excellent video introduction to commercial r.e. investing. I receive a gold nugget each time I listen to your videos. Thanks.
How do I Get in touch with you or your staff. This is not a comment rather a question.