The key to making money on your real estate investment is making sure that you have the best investment strategy for your goals. There are many types real estate that someone can invest in and it’s important to implement the appropriate strategy for each type.
The main types of commercial real estate are:
- Land. This can be purchased to develop or reuse for commercial property.
- Office space. You get a return on investment from tenants in the property.
- Industrial space. Large warehouses or manufacturing industries.
- Retail space. This could include shopping malls, retail centers, and strip centers.
- Mixed-use properties. This can include anything like museums, churches, theaters, nursing homes, and community centers.
- Multi-family apartments. Usually, 3 – 4 stories with many units or apartments.
Investment Strategies for Commercial Real Estate
Here are the three main strategies to see a solid return on investment from your commercial properties.
Risk/Return
Most commercial real estate investments rely on tenants to regularly pay rent and having a good and reliable property manager. You should always make sure and properly screen tenants before signing any commercial lease. The risk of tenants is that they can go out of business, move, or be late in paying their rent.
A property manager can also make or break your investment. So make sure and hire a reliable property manager who will keep the property in good order and have a working relationship with you and your tenants.
Own and Operate
If you own an office building or multi-family apartment block, you can increase your return on investment by charging for common access maintenance fees. You could also look at other ways of monetizing public areas. You should always try and require long-term leases of at least 3 years to ensure a steady income from your properties. However, if you are renting out residential units, this may not be possible.
Buy and Hold
If you want to see the greatest long-term return on investment on your properties, then buying and holding properties is the best option. This allows you to continually make improvements to the property and surrounding area which can increase the value of your property. Be careful of making long-term alterations for one tenant which may reduce your chances of re-letting the property when need to find a new tenant.
