There are a lot of different options for people who want to get involved in real estate investing. Residential real estate is what commonly comes to mind, but that’s not all you can invest in. There are also opportunities in raw land, industrial real estate, and commercial real estate. While more difficult to break into than residential real estate, there are some benefits to getting into commercial real estate.
Commercial real estate has the potential to net its investors much greater returns than other types of real estate. Commercial properties are usually bigger than residential properties. Coupled with the tendency for commercial properties to be divided into different segments that can be rented to multiple entities, thus diversifying your risk, the amount of income generated is usually greater. What you can charge to rent your property will depend in part on the property value. This will have an impact on your rate of return, though there are other things you can do to boost your returns.
Additional Financing Options
One of the most common barriers to breaking into commercial real estate is how much more expensive the properties are to purchase. Fortunately for those getting into it, additional financing options are available that wouldn’t be options for residential investments. Commercial properties qualify for SBA loans, including 504 and 7a loans. In order for borrowers to qualify for SBA loans, they must meet requirements based on a few factors. These include the size of their business, the type of business, their credit background, and the business’s financial situation. Additionally, you’ll need to have some form of collateral, a 10% down payment, and a personal guarantee from anyone who owns at least 20% of the business.
Greater Income Stability
Income stability can be a major concern for real estate investors. After all, if you don’t have tenants paying rent, you still have to pay your mortgage and other expenses. Fortunately for commercial real estate investors, this type of real estate investing tends to offer greater income stability. More tenants in your property means that you are less impacted by losing one. Make sure you do your part to find the right tenants for your property to further increase your income stability.
Commercial real estate offers multiple benefits to investors. It offers the potential for greater returns, additional financing options, and greater income stability. If you have the resources and capital to get started in this type of real estate investing, it’s definitely worth your consideration.
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Ready to break into commercial real estate investing? Give us a call at 804-464-3898 and take a look at the properties we have for sale!