By: Edward McCarthy
President: Sell By Owner Listings, Inc.

Commercial Real Estate Investing Basics

Commercial real estate investing is not as prevalent as residential real estate investing. This is due in part to the fact that commercial real estate investing is riskier than other kinds of investments. It also calls for an increased amount of cash outlay. The rules involved with commercial real estate investing makes it slightly more difficult for investors to make a profit in the arena.

When most people think of commercial real estate investing, they simply think that it means investment in anything that is not a house. However, the process of commercial real estate investing is much more complex than the prevailing notion.

There are several different categories of commercial real estate investing. When an investor becomes involved in commercial real estate investing he or she can deal with one or more of these categories. The categories that make up commercial real estate include multifamily, office, hospitality, industrial, and retail. Since each of these types of commercial real estate has characteristics that are not shared among the other types, commercial real estate investing becomes slightly more complex.

Investors that seek to become involved with commercial real estate investing should become familiar with the different kinds of commercial properties to better determine the type of investment property he or she would like to deal with.

Real estate property that has at least five dwelling units, but usually contains more, is considered multifamily commercial real estate. Multifamily real estate is made up of many other subsets of real estate including townhouses, military housing, apartments, and student housing. This part of commercial real estate investing is very similar to residential real estate. For this reason many investors that seek to go into commercial real estate investing choose this category as their arena to work with.

Office commercial real estate is basically real estate that is used by companies to get work done. It includes office over retail properties, mid-rise towers, hi-rise towers, and single tenant spaces.

Hospitality commercial real estate is made up of hotels and motels. For commercial real estate to be considered hospitality, renters should only be allowed to dwell in the property for less than thirty days. Even hospitality commercial real estate can be broken down in into sub-categories depending on the service that is provided. Full service hospitality real estate is that which includes luxury, upscale, mid-scale, and extended stay facilities. Another sub-category of hospitality real estate is limited stay. This includes some mid-scale properties as well as economy, extended stay, and budget.

Industrial real estate is that real estate that can only be used for purposes that are related to industrial uses. Some examples include manufacturing, research and development, and warehouses.

Finally, retail commercial real estate is the place where retail business is conducted. This sector of commercial real estate includes many subsets of real estate including outlets, free standing malls, strip centers, and single tenant spaces.

Knowing the various kinds of commercial real estate is extremely beneficial to those that are interested in going into commercial real estate investing. This knowledge is the best way to determine the kind of commercial real estate investing worth getting into.

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