How to Start Investing in Commercial Real Estate

How to Start Investing in Commercial Real Estate

When most people hear the word “investing” they immediately think of the stock market, making bets on up and coming stocks and hoping to win big when you sell before the inevitable crash. And, while that’s definitely a type of investing that can be lucrative for savvy investors, it’s not the only way to make money through your investments. 

Commercial real estate investing is another area where you can make serious cash, and it’s often much lower risk than taking a bet based on the hype surrounding some shiny startup. There are tons of benefits that come with commercial real estate investing: you’re more in control, as you can invest to improve your properties as much as you’d like, and in the long-term, real estate prices tend to improve—especially if you’re based in an up-and-coming area.

Getting started in commercial real estate can be daunting, but with the right research and information, it can be tackled by just about anyone. Here’s what you need to know. 

Find a growing market

First, you’ll want to find a market that’s actively growing, where new jobs and booming industries are settling, and where young people and wealthy people find it desirable to live. With a list like that, your first thoughts might be the San Francisco Bay Area, or New York City. 

However, massive boom towns like these have started to run dry for real estate investors, as all the best spots in town have already been purchased by massive companies. 

Real estate investors looking to cash in on a fresh wave of growth happening in other parts of the country, and the list may surprise you. These include areas like:

  • The Southwest, including Nevada, Utah, and Arizona – check out Salt Lake and Reno for two towns showing amazing growth.
  • Texas – Commercial real estate in Houston and Dallas in particular are smart to watch.
  • The Mid-Atlantic region, including Maryland and Virginia – Washington DC itself is actually seeing a huge surge in new business.
  • Nearby regions outside the country, like Toronto and Tijuana, also present exciting opportunities.

Be sure to do plenty of real estate market research before diving in. And remember, it’s not just the state or even city that matters, but the neighborhood and surrounding area, too. Growing markets have a tendency to spread to nearby areas, but it’s important that you do fine-grain research before putting serious cash on the line. 

Speaking of serious cash, let’s talk about assets. 

Consider your assets

Assets are basically anything you own that has value or that you can use to create value. When investing in real estate, it’s important to know how to properly leverage your assets in order to acquire new holdings. Here are a few ways that that can be done:

  • Use your assets as collateral to acquire a hard money loan, which are a common way to finance a speedy real estate purchase—especially when you intend to sell soon after.
  • Sell off assets to save up for a bigger down payment. The larger the down payment you make, the lower your interest rate is likely to be. 
  • Think about how you can use your current assets to snowball into larger acquisitions. Remember: the point of investing is usually to reinvest, growing your fortune. 

Once you’ve assessed your assets to ascertain how you can leverage them into future asset acquisition, it’s time to get serious about strategy.

Think about strategy

The next thing to think about when planning your real estate investing journey is your game plan. What’s your long-term goal? There are a few you might be toying with:

  • A steady side-income generated by your property holdings, which can augment your earnings from your day job
  • A way to increase your personal wealth profile by adding assets you’ll hold on to for the long-term
  • Create a fundable business plan and rent out your commercial real estate to local merchants
  • Selling and reinvesting in more properties, steadily snowballing your real estate into a massive empire

Of course, each strategy requires its own research, so you should be sure to read more about real estate investing on this site before you jump ahead with any particular plan. Commercial real estate can be a massively lucrative opportunity for the savvy and careful investor. Start your journey by reading and learning more today!