Investing in the commercial property business can be one of the best investment decisions you can ever make. But the initial step to property investment might be a challenge, especially to beginners who are trying to penetrate the market. One of the questions you might be asking is which options are available to get a commercial property for your venture. If that’s the case, then you’ve come to the right place for commercial real estate (CRE) property investment tips.
This article has all you need to know about the available acquisition options—from funding on your own or with the help of www.commercialloans.com.au and others. But before proceeding, you need to understand what commercial property is.
What Is A Commercial Property?
Commercial property is a building specifically designed and used for business purposes. It houses businesses whose primary objective is to generate profit. Examples of commercial properties include office buildings, grocery stores, malls, and much more.
Commercial properties can be categorized into five major classes. They include office spaces, multifamily properties, retail properties, industrial properties, and hospitality properties.
Office space properties are used for office functions and these can be categorized into Class A, Class B, and Class C. Class A offices are new or well-maintained spaces and are always priced high. On the other hand, Class B office spaces have been used for quite some time and must be updated or renovated after buying them. Class C office spaces are old properties that have been used for more than 20 years.
Multifamily commercial properties are residential buildings comprising apartments and complexes. On the other hand, retail properties are shopping stores or malls used to sell products and services. Industrial spaces are buildings used as factories to manufacture and distribute products. Finally, hospitality spaces are hotels or motels used for recreational and lodging purposes.
Ways To Acquire A Commercial Property
As a rule of thumb, do thorough research to find out which CRE would best suit your needs. Here are the options for getting a commercial property:
1. Buy Under Market Value And Flip
This is one of the most popular real estate investment options. It involves looking at off-market establishments such as repossessed buildings and then using a financial plan to purchase them. When done right, this option can help you generate high profits.
2. Lease Option
Leasing is the best commercial property investment option because it requires a low initial capital outlay. This option allows you to rent or own property without buying it. You’ll only be required to pay a small upfront contract fee and then agree on the amount you’ll be submitting each month to the property owner. You’ll also set the length of the contract, and at the end of the terms and conditions, the owner will give you an option to buy the property should you wish to purchase it.
3. Property Crowdfunding
Property crowdfunding is an option allowing you to get a commercial property in partnership with many investors. It’s where several people contribute funds toward owning a particular property, so each one of them will have a small percentage of the building.
4. Joint Venture
A joint venture is an arrangement where two or more parties come together, with each having something great to offer to the other. For instance, one party can bring in finance while the other can come with great strategies on how to penetrate the market.
Apart from developing business partnerships, a joint venture arrangement offers more security, and it’s one of the easiest ways to venture into commercial property investment, especially when you don’t have enough capital. You’ll only be required to bring in your ideas and partner with someone else who's willing to fund the project.
5. Peer-To-Peer Lending
Peer-to-peer lending is a strategy that allows you to invest directly with another person. In this option, all investment transactions are carried out on a peer-to-peer platform rather than a bank. This helps get more returns because this is cheaper than what the bank charges. But you need to note, peer-to-peer is a type of unsecured loan, and you might end up losing your money if a borrower fails to return the borrowed money.
6. Use Of Own Capital
This option is sometimes referred to as own equity finance. It involves using your own money to finance your commercial property investment. Using own capital is the least preferred option by most investors because of the risk involved in the investment. You should consider this option only when you’ve back up funds just in case things go wrong in your investment journey.
CRE Conclusion
As explained earlier, a commercial property applies to any building you can use to expand or grow your business. It ranges from office spaces to industrial buildings. Mentioned above are the options you can use to get a commercial property for your venture.
