Commercial Real Estate Investing – Texas Commercial Real Estate Investing

Real estate investments are considered a great way to build wealth. Specifically, commercial real estate investing is recognized as offering some of the highest and dependable income streams and equity appreciation. So, what is the meaning of a “commercial real estate investment?” 

Commercial real estate is referred to as a property that is leased out for office, warehouse, industrial, business or retail purposes. When a person invests in commercial real estate, it means the purchase or development of a property that has been planned with the intent of housing commercial tenants. It is different from investment in residential real estate, such as multifamily. In commercial real estate, the investor leases out and collects rent from the businesses that occupy space in their properties, instead of collecting it from residential tenants. Any raw land which is purchased for the development of the commercial property, as apposed to speculation, is also included in this scope of commercial real estate.

In 2020, much like other industries, the investment market will also face bigger challenges and proper due diligence, and analysis of other market forces, is essential. Investment in buildings which have smarter technologies, suitable locations and other associated attributes, can witness better returns for investors. This needs to be analyzed properly by a seasoned buyer before making any investment decision. If you’ve been looking for investing in commercial real estate, MarketSpace Capital can assist you in getting started and making smarter, more educated investment decisions. MarketSpace Capital emphasizes on the ground-up developments, value add investments, and has historically made multiple investments in the commercial space. Consequently, MarketSpace Capital can assist in offering this expert advice in commercial real estate. 

TYPES OF COMMERCIAL REAL ESTATE INVESTMENTS

Commercial properties can generally be categorized into five main types:

  1. Office

Ranging from single-tenant offices to multi-tenant skyscrapers, office space is the most common type of real estate. They are defined by one of three categories: Class A (Newly built/extensively renovated buildings), Class B (Older buildings requiring capital investments), or Class C (Requiring redevelopment).

 

  1. Retail

Retail buildings range from strip malls and community retail centers to banks and restaurants and are often located in urban areas. 

 

  1. Industrial

Offering spaces with height specifications and docking availability, industrial buildings are mainly referred to as manufacturing industries.

 

  1. Special Purpose

Special purpose properties are planned for a specific use, to the extent that it becomes difficult to repurpose the property for another use. Examples: Car washes, self-storage facilities, schools, leisure, tourism industry, etc.

THE BENEFITS

The returns from investing in a commercial real estate can be very gratifying and can benefit you personally and financially. For many investors, the rationale of investing in commercial real estate is for future wealth and security. While for others, the objective might be to utilize it for tax benefits and investment portfolio diversification.

A commercial real estate investor can also take advantage of the following benefits:

Better Return and Higher Income: The symbolic benefit and goal of investing in commercial real estate is an advanced and higher potential income. Generally speaking, commercial properties have a higher return on investment in comparison to similar investments in single-family, house properties. Another benefit of commercial leases is that they are generally longer term leases when compared with residential real estate. This results in far less tenant turnover to deal with in commercial real estate.

Consistent Cash Flow: One of the distinct advantages of investing in commercial real estate is the consistency in the stream of income because of longer lease periods. This helps the investor in achieving economies of scale and multiply their income streams in an exponential manner. Other benefits associated with this triple net lease are that many tenants also pay for the building’s real estate taxes, property insurance and maintenance costs. This helps in increasing the economic benefits of the property owner.

Less Competition: Due to the apparent struggle of commercial investing, the commercial space tends to be less drenched with other investors. This helps the commercial real estate investor in entering into a less competitive market.

Tax Sheltered Cash Flow: As in most real estate investing, the effects of non-cash items such as depreciation and amortization can be of great benefit to the commercial investor. As a result of such non-cash tax deductions, a large portion of the income is therefore, not categorized as taxable income.

As can be seen, commercial real estate investing gives an investor a collection of opportunities and benefits that are absent in other investment strategies. Once these benefits of a commercial real estate investment are understood and recognized, MarketSpace Capital can help you to take the next step of diving into the commercial real estate investment.