The commercial real estate is a huge market with many sub-sectors. There are also many participants in the sub sectors. If you are planning to indulge in commercial real estate, then it is very important that you know the right niche for the same. This will help in focusing your attention at the right place and not work arbitrarily.
Here are the common types of commercial real estate types you should know:
Land and Land Development
Making investments in land is a highly profitable thing. The main reason behind it is that new lands cannot be made and so the existing ones have to be used in the best manner. Therefore demands of good land will always be there as it is becoming scarce day by day. However, just keeping raw land will not be of much help. The land has to be developed by so that it becomes a valuable asset and a source of further investment. It will depend on the ability of the investor as how he utilizes the property for making greater gains from the same.
Development of a land for something valuable involves many steps. In fact there will be many situations and circumstances that might affect the development of the land in the way you want. If the development on the land is done in a proper manner, then there are chances of making huge profits in it. Since there are many risks involved in the business, it is recommended that weak hearted people should not indulge in it. This business is highly speculative and capital intensive in nature.
Office Buildings and Structures
An office market can help in making great profits. This area of commercial real estate is developing really fast as there are high demands for the same. Usually office buildings are profitable because most of them are given out on long leases. The span of the lease is mostly for three years and above. In this kind of investment, the landlord will get long term monthly payments on a regular basis. So it becomes a steady source of income for the landlord without doubt. The only negative side to this investment is that it might take some time to find the right office tenants for the lease. This can be the lean period.
Retail Shopping Centers and Malls
For commercial real estate investors, retail shopping centers and malls are highly profitable. In a retail shopping center, it is possible to have large numbers of tenants on various scales. Large retail shopping centers and malls define a particular community and they are frequenters of the place. The only thing to keep in mind regarding making investments in these properties is the location. It is always recommended to have a shopping mall or a retail shopping center in an area which is accessible to ongoing traffic. Having such a property towards the interiors of a place or in some remote location will be a total flop.
Multi-family Housing and Apartments
If you are looking for long term passive income, then there is no better option than investing in apartments and multi-family housing projects. The demands for rental housing are always high, however if you are looking for management intensive approach, then investing in a multi-family housing is a great thing. Usually residential tenants go for lease terms for a year or so, in contrast to commercial lease agreements which are minimum for three years for sure. The tenant turnover is therefore quite high in residential tenants. There has to be a great and effective management plan so that the housing units are kept up to date and there are paying tenants in all of them.
Understanding the four real estate types will help in making the right decision regarding commercial real estate investment.
The author of this article is associated with iBuild2.