Commercial real estate is its own class of real estate investing.
Learn the ropes in this commercial real estate guide for beginners.
When starting a new venture, like investing in commercial real estate, a guide is helpful. Commercial real estate (CRE) has the potential to provide significant income to brokers or investors, but there’s a lot to learn before diving in. Even experienced real estate professionals can benefit from a guide to commercial real estate investing if they’re new to the business.
This commercial real estate guide will break down everything you need to know about CRE, including common terms, different property types, ways to invest, and types of loans.
Types of Commercial Properties
Commercial real estate is a general term for several types of commercial properties. As a rule of thumb, commercial real estate properties are used for business purposes. Commercial spaces are typically categorized into five main categories:
- Office space
- Multifamily (e.g., apartment complexes)
- Retail spaces (e.g., strip malls, malls, or single retail spaces)
- Industrial (e.g., warehouses, data centers, manufacturing buildings, or self-storage)
- Special purpose (e.g., churches, bowling alleys, daycares, hotel lodging, or health care)
CRE can be purchased by a business to be owner-occupied or as an investment for cash flow. Similar to a residential rental property, most CRE provides passive income to the owner from leasing the unit to a tenant.
Why commercial real estate?
Commercial real estate is an appealing asset class because you can invest in properties with multiple streams of income. If the tenant of a residential rental stops paying, 100% of your income is gone until you can get a new tenant into the property. If you own a multi-unit commercial property, you have additional income sources to offset any vacancies. It’s a more stable investment.
You also have the potential to earn a higher income with commercial real estate. Depending on the size of the property, you could general hundreds of thousands of dollars of cash flow annually.
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