I have thought about investing in commercial real estate for a long time. In fact, I think the obsession started when I was a teenager and I began debating how I would move out of the house. Would I rent or would I own property? What were my options? How much would each option cost? I considered renting because it seems to be worry-free and one can find a small apartment for very little money each month. However, I then began to think about where my money was going. My rent money would be going to a land-lord who then put it toward the mortgage. He was using my money to buy these properties! This is when the obsession for rentals began.
Commercial Real Estate
The term, “commercial real estate” can span across many areas. You could rent out an office building, a manufacturing facility, and apartment complex, or just one house at a time. If you purchase a property in order to generate a monthly income, you are investing in commercial real estate.
So which option is best? If your property is earning you a net gain of 10% or more on your investment, then I would consider it a quality investment regardless of whether it’s an apartment complex or if you’re leasing out a car wash. The answer to which investment option is best for you must come from your interests, the available properties in your area, and the demand from your demographic. Let me try to explain.
Where do you see yourself in 30 years? What type of properties would you like to own? Perhaps you’d like to live in a penthouse on the top of a high-rise apartment complex. Do you know the best way to make that happen? Own one (the entire apartment complex I mean)! Perhaps you’d like to start your own manufacturing line of one of your inventions in the future. It would be pretty easy to find a space if you were the land-lord of manufacturing lots. Better yet, maybe you would like a car lot when you retire. Rent out the lots now, which would give you the option to take one over at your convenience. Whatever you are interested in, make that your investment. It will make your business much more worth-while.
Perhaps you would like to invest in a multiplex apartment unit, but there are only two in your city and they are owned by a 30 year old who has no interest in selling. It’s a unfortunate situation, but you won’t always be able to find the exact properties that you want. Either you decide to build that multiplex, or you start out begin your empire with a small home and build from there. You must work within the confines of what is available.
What is the Demand?
Owning a car wash property might sound like a great idea, but if there are already six car washes in your town, no business man will want to lease your car wash because they’re almost guaranteed to lose money with all the competition in the area! The same is true for apartment complexes. If there aren’t any people that want to rent in your area, then buying up a multiplex is most definitely not your best option. First think about the demand, then choose one that you’re interested in, and then find that available property. Good luck!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.