Commercial real estate investing is becoming more and more popular for investors everyday.
People often assume that commercial real estate investing can only be done by the very best experts; however, there are a number of different options when it comes to financing a commercial real estate deal – including the unconventional route that incorporates utilizing REITS as capital. Although commercial investing isn’t necessarily the best place for beginners to start, it is certainly a perfect future goal to set as it is a great way to diversify your investment portfolio.
Curious about which commercial real estate markets are best for getting started? It is important to keep a few priority items in mind. Commercial real estate markets that encompass these five criteria will be most profitable for investors:
- Low Unemployment Rates. Cities with a low unemployment rate indicate that there are more citizens in the job force, which means more office space is needed.
- Low Purchase Prices. This might sound like a no-brainer, but it is important to find property that is priced either below or at market value. If you want to make a profit off of your renters, consider finding a sightly distressed property that is being sold for a deal. There is also the option to buy a commercial foreclosure.
- High Asking Rents. Be sure to do your due diligence before jumping into commercial real estate and research comparable markets to see what average asking rent prices are. If the asking rent rate is high, and your purchase price is low, you should make a substantial profit.
- High Tenant Demand. Search for up-and-coming markets that are creating new jobs and developing new residential complexes because there will be an increased demand for space.
- Low Vacancy Rates. If you have high tenant demand coupled with low vacancy rates, you will be able to charge a higher rent price, therefore increasing your profits.
The Best Commercial Real Estate Markets To Consider
There are four different types of commercial real estate spaces investors can consider: retail space, office space, industrial space, and multifamily complexes. If you’re looking to invest on a budget, start with either industrial spaces or multifamily complexes as those options tend to be slightly cheaper than retail and office space.