5 Best Commercial Real Estate Types for Individual Investors

1.Apartments

• 5 units and greater are considered commercial real estate

Why Invest in Apartments?

• Everyone needs a place to live
• You can generate a large amount of Cash flow
• Force appreciation by increasing rents or reducing expenses
• Apartments produce great tax shelters
• As you make your mortgage payments you reduce your principal and create equity
• You create wealth by increasing your equity and cash flow
• Easiest commercial real estate to get into

SWEETSPOT of Apartments:

• Between $500,000 and $5 million
• Not worth it to go below
• Too much competition above

CONS for Apartment Investing

• If your neighboring developers are building new apartments
• New builds will attract your buildings ability to attract new tenants
• Sometimes people do bad deals

2.Self-Storage

• Self storage are commercial buildings with individual rooms where people store their stuff
• They come in different sizes
• Also include boats and rvs stored

WHY Invest in Self-Storage?

• Same as Apartments but you are missing two things that are to your advantage
• Missing tenants (easy evictions, not labor intensive)
• Missing Toilet Repairs (Less maintenance)
• Creates cash flow
• Force Appreciation
• Experts consider Self-storage economy proof

Sweet Spot of Self Storage

• Buy a large enough self-storage facility to be able to employ a property manager
• Do not do this yourself

Cons of Investing in Self-Storage:

• If the neighborhood has decreased in value your facility might not be desirable
• Location is extremely important
• It can take a while to occupy all of the units

3.Shopping Centers

• Strip centers large or small
• Shopping malls indoors or outdoors

WHY Invest in Shopping Centers?

• Stability
• Most tenants sign a 5-20 year lease

Sweet Spot of Shopping Centers:

• Buy Small, start small, and scale up

Cons of Shopping Centers:

• Capital Intensive
• Need lots of cash
• If a major tenant leaves It can take up to 30% of the income
• You will still have to pay mortgage as you build up for the next tenant

4.Office Buildings

• Single building with one tenant all the way up to a skyscraper that’s 80 floors and dozens of tenants

WHY Do We Invest in Office Buildings?

• When the economy is booming their rents can be astronomical
• Can make a lot of money by holding onto them for a long period of time

Sweet Spot of Investing in Office Buildings:

• Start small, buy an office building with multiple tenants with long term leases
• Cons of Investing in Office Buildings:
• They depend on the economy
• If the economy goes down the office building goes down

5.Mobile Home Parks

• You either own the mobile home park and the tenants bring the mobile home
• You own both the park and the homes and rent out both
• It is better to own only the mobile home park aka dirt because less maintenance and expenses

WHY Invest in Mobile Home Parks

• They produce cash flow
• Affordable housing demand is great
• You won’t see many new ones being built
• Tenants tend to stay a very long time
• Most mobile home parks are seller financed

Sweet Spot of Investing in Mobile Home Parks:

• Buy a mobile home park that is big enough to hire a property manager

Cons of Investing in Mobile Home Parks:

• They have a negative reputation
• Financing for mobile home parks is difficult to get

Conclusion:

• F.O.C.U.S

Follow One Course Until Successful

• Choose one route to go and stick with it
• Weigh the probability and the size of the investment