How You Can Make Money Off of Commercial Real Estate
Real estate, whether it be commercial or residential, is everywhere you go. From houses to apartments, office spaces to strip malls, there is a building in which someone owns and is making money off of.
Investing in commercial real estate is a lot different than other investments in the stock market. Instead of continually trading stocks and bonds, your commercial investment is a physical asset you own. With commercial real estate, you own a business in which there is a demand for – a small business owner looking for a space to rent so they can set up their store. The tenant provides money in exchange for using the area.
There are two common ways to make money off of investing in New York City commercial real estate. The first is through the income from the tenant. The second is through the appreciation of the property over time. Let’s take a look at both of these methods.
Tenant Rental Income
The most common way to earn an income through commercial real estate investments is by having a tenant. Someone wants to rent out the space and will pay you money for it. You then would sign a lease depending on what the agreement is on.
Types of real estate income include offices or retail, apartment buildings, and more industrial style buildings. For offices, you could own a building and subdivide it into different sections for different companies. All they need is some space to put in desks and house their employees. You would take care of the maintenance of the building, and they’ll pay a monthly rent. The same goes for retail spaces, except they need an actual store for customers to come into.
With apartment buildings, these are more significant investments. You invest in multi-family buildings that have residents as tenants. There are different ways in which you can have a lease, depending on what you’re looking for. The bigger the building, the more tenants you can bring in and the more money you’ll make from the monthly rent.
Lastly, there are more industrial style buildings. These could be manufacturing companies or even storage units. Chances are you’ll be able to lock in a longer lease than other types.
Another way to make money in commercial real estate is almost similar to how you invest in stocks. You buy a building at a lower value and hope to sell it later on at a higher value. The real estate market is tricky though because it can quickly go the other way and make you lose money.
You don’t have to sell the property to make money off of the value appreciation. When the value increases, you can adjust the rent accordingly. When there is high demand for a particular type of building, typically the price will reflect the demand.
When it comes to commercial real estate investments, take the time beforehand to become familiar with the market. Jumping in with little to no knowledge can set you up for failure. Research as much as you can on the market and the potential area you want to invest in to help you make a better deal.