If you’re an investor, you’re probably always looking out for your next investment, the next addition to your portfolio that could be the one to double its value. If that sounds like you, it might be worth your while to consider investing in commercial real estate. It offers a few key advantages over other types of investing such as the stock market, in that not only does it stand to offer a huge return on investment due to appreciation, but you also get monthly income from renting the space out.
The Four Types
This variety of investment comes in four types, each distinct from the others and offering its own advantages. Below is a brief overview of each of these four types, including common lease terms and purposes.
- Industrial: You’ll typically find manufacturing facilities, warehouses and research facilities in these types of properties. They’re usually found in less desirable areas than the other types of investments, so that is definitely something to consider when you’re thinking about appreciation or alternate uses. Due to the types of companies that will be leasing the space, you can count on leases running for at least five years.
- Multifamily: There can be a lot of variation in these types of buildings, as they can range from smaller buildings converted from an original use into apartments, or larger apartment complexes or condominiums. With that said, you’ll be looking at shorter lease terms, but stand to be collecting monthly rent payments from many more sources.
- Office: The space in these buildings is usually rented in longer terms, probably between five and ten years. Office parks, converted buildings, and skyscrapers all fall into this category.
- Retail: These spaces can also look very different from one another — standalone buildings, strip malls, outlets, or plazas all fit into this category. The occupants can vary depending on the location of the space, but typically will be rented for around five years.
What to Consider
Since this investment type comes in so many different varieties, it’s wise to think about what you’re looking for as an investor. All offer monthly income, but some will require more work in renovation and keeping the space occupied. With different tenant types, lease terms and typical locations, each is suited to a different management type. Consider your management style and the type of work you enjoy. These considerations will help you to decide what type of commercial real estate will work best for you.