Why and How to Invest in Commercial Real Estate: Beginner’s Guide
When trying to diversify your portfolio, build long-term wealth, and generate a passive stream of income, investing in commercial real estate is a great place to start. While investing in commercial real estate can seem daunting and complex, when you partner with the right investment firm, it becomes a rewarding experience.
This guide explores how to invest in commercial real estate, and why this is an excellent investment endeavor. Whether you're new to investing or looking to expand your portfolio, this beginner's guide will help you confidently take the first steps.
Why Invest in Commercial Real Estate?
Commercial real estate has several benefits that make it a great addition to any investment portfolio. Here are some compelling reasons why CRE should be a part of your investment strategy.
High-Income Potential
Commercial properties tend to bring in a higher investment return compared to residential ones. Buildings that rent to companies like Walmart, Dollar General, or CVS tend to have long lease terms, bringing in a steady rental income.
Here at Freedom Commercial Real Estate, we focus on investing in double and triple-net leases, minimizing overhead while maximizing investment returns.
Steady Cash Flow
Commercial property leases last for several years, bringing a steady stream of cash flow. Even in uncertain economic times, you can rely on the rent being paid for by these rentals backed by large corporations.
Diversification
Investing in CRE provides diversification by spreading risk across different property types and geographic locations. This reduces your reliance on the performance of traditional assets like stocks and bonds.
Long-Term Wealth Building
Commercial properties appreciate over time, letting our investors build equity. By holding properties for the long term, you can benefit from market appreciation while generating consistent income.
How to Invest in Commercial Real Estate
Investing doesn’t have to be overwhelming. Here’s our step-by-step guide to learn how to start investing in commercial real estate.
Step 1: Identify Your Reason For Investing
The first thing we always want to know when someone is investing is their reason for investing. Ask yourself:
Why do you want to invest?
Why do you want to make passive income?
What would a passive income stream mean for you?
Step 2: Educate Yourself
Once you know why you want to invest, it’s time to start educating yourself. The world of commercial real estate investment is huge, and there are many opportunities available to you.
Learn about the different property types, like office spaces, retail centers, industrial properties, and apartments. Find out how the market works and what factors impact property values.
We recommend checking out our blog and watching some of the podcasts our owner, Zane, has been on to immerse yourself fully in the world of commercial real estate.
Step 3: Become An Accredited Investor
To make the most out of your venture into commercial real estate investing, it’s important to become an accredited investor.
Learn how to become an accredited investor and take the steps necessary to become accredited.
Step 4: Secure Financing
Financing is a critical aspect of CRE investing. Determine how much capital you need and explore financing options like:
Commercial Mortgages: Traditional loans for purchasing commercial properties.
SBA Loans: Ideal for owner-occupied properties, these loans are backed by the Small Business Administration.
Private Equity Partnerships: Pool resources with other investors to acquire larger properties.
Work with lenders to understand terms such as loan-to-value (LTV) ratios, interest rates, and repayment schedules. A strong financial plan guarantees you’re prepared for acquisition and operational expenses.
Step 5: Find the Right Properties
Your investment success depends on choosing the right properties. Use these tips to evaluate potential deals:
Research Locations: Look for properties in areas with strong demand, high foot traffic, and economic growth.
Assess Property Value: Analyze comparable sales, income potential, and market trends to determine fair pricing.
Conduct Due Diligence: Review financial statements, inspect the property’s condition, and assess tenant stability.
If all of this seems like too much for you, consider working with an investment firm like Freedom Commercial Real Estate. We do all of the legwork so you can enjoy a truly passive income stream.
Types of Commercial Real Estate Investments
Commercial real estate spans a variety of property types, each with unique opportunities and challenges:
Office Buildings: Leased to businesses for administrative functions.
Retail Spaces: Include shopping centers, grocery stores, and standalone shops.
Industrial Properties: Warehouses and distribution centers are ideal for logistics companies.
Multifamily Units: Apartment complexes with steady residential income.
Special Purpose Properties: Hotels, schools, and other niche-use properties.
Each property type requires different expertise and investment strategies, so choose one that aligns with your goals.
Benefits of Partnering with Freedom Commercial Real Estate
Navigating the commercial real estate market can be challenging for beginners, which is why partnering with an experienced firm makes all the difference.
At Freedom Commercial Real Estate, we:
Provide access to diversified, income-generating properties.
Handle due diligence, underwriting, and property management for a 100% passive experience.
Offer transparency and expert guidance, ensuring your investments are secure and profitable.
Start Your Commercial Real Estate Journey Today
Investing in commercial real estate is a powerful way to build wealth, secure a steady income, and achieve financial freedom.
If you’re ready to start investing, let Freedom Commercial Real Estate help you every step of the way. Contact us today to explore investment opportunities and start building your future.
