So you dabbled in residential real estate ventures, you made some money and now, you’re thinking about trying your hand at commercial real estate investing. Sound familiar? If so, read on to learn how to get started with your new investing venture.
First – ask yourself these two questions:
- Do I have the funds to purchase a commercial property?
Commercial properties are almost always substantially more expensive than residential properties are. Make sure you have the capital to invest at the ready. If you don’t, decide whether or not you’re willing to join in on crowd-funded or group investment projects as your first step into commercial investing.
Do I have financial, business or trade expertise could be valuable to my investment strategy?
Sometimes, thinking about your area of expertise or your work background can lead you down a natural investment path. If you spent 15 years in healthcare administration, you may be well suited to join an investment group focused on healthcare properties because you have valuable insight to share. Keep your skillset in mind as you start to lay out your commercial investing roadmap.
Once you’ve decided that you definitely want to stake claim in the commercial real estate investment space, it’s time to start defining and refining your path to success.
Make some decisions about how you’re going to get into commercial investing:
Step one – decide what kind of investment you want to pursue:
Do you want to be a landlord who owns commercial property or are you more interested in joining an REIT investment group that cooperatively purchases office buildings? On your own, you’re taking on all the responsibility of the investment but you also reap all the rewards. As part of a larger group, you share both the investment risk and profits of your purchases. Consider the pros and cons of each and decide which route makes the most sense for you.
If you choose to go the REIT route, your investment group will guide you on next steps. If you haven’t found a group yet, do some research on where you can locate REIT investment groups in your area and reach out to multiple groups with specific questions. Repeat this process until you find the right fit.
Step two – decide how much money you can invest and how to finance your purchases:
There are a few financing options you can consider, including traditional loans, hard money loans, partnership investing, real estate crowdfunding and so on. Talk to a local lender who is well versed in commercial investing to talk about options.
If you decide to go the traditional loan route, get pre-approved by your lender so you have a good idea of how much property tou can afford. Before you buy anything, it’s also wise to check with your financial advisor to make you’re making a good move that will help diversify your financial portfolio.
Use this post as a guide to help you determine where to start as you contemplate taking the leap into the world of commercial real estate investing.