Discover A New Way To Diversify With Commercial Real Estate
If you see tremendous opportunities in the commercial real estate world, Saint Investment Group is here to help you get into the game. When you want a stable, low-volatility place to grow your wealth, diversifying your portfolio with a commercial real estate fund, Saint Investment Group can provide you with asset security and appreciation while earning passive income long term.
What Defines A Property As Commercial Real Estate?
To begin with, let’s define what constitutes commercial real estate property. At a fundamental level, commercial real estate is space that’s leased for office and retail reasons. Most often, the construction of commercial property is designed to be specific to business use rather than residential use, except for multifamily properties. There are five common categories of commercial real estate.
Types Of Commercial Real Estate For Investment
There are various property types when it comes to commercial real estate, each with unique factors that make them more or less optimal for growth-oriented real estate investment trusts.
Commercial properties can serve a wide array of uses, but the common categories of commercial property are:
How does real estate syndication work?
Real estate syndication is a process by which a group of investors pool their money to purchase a property or properties. The group is typically managed by a syndicator, who is responsible for finding and vetting investment opportunities, negotiating deals, and managing the property or properties.
The syndicator typically raises money from a number of different investors, each of whom contributes a certain amount of money to the deal. The syndicator then uses that money to purchase the property or properties.
Industrial property is often used for manufacturing and logistics uses, as these types of buildings provide greater height clearances and truck docking capabilities for large shipments. As a result, these commercial properties can be some of the most prime assets held in a commercial real estate fund. Industrial properties are generally leased for multiple years with high credit, stable tenants, providing consistent and significant positive cash flows.
Multifamily commercial property ranges from small multifamily buildings in the suburbs to entire apartment complexes to luxury high-rise condominiums in hot areas of major cities. At their core, these properties could be as small as a duplex. Still, most often, real estate investors focus their capital on more significant multifamily properties that offer better risk distribution and greater economies of scale with expenses (bigger is better!).
Typically, multifamily real estate properties have shorter lease terms and higher turnover than more business-oriented commercial properties like industrial and office buildings. However, many markets have experienced greater rent increases in multifamily versus other commercial property types.
Office buildings are the most common type of commercial property, and they range in size from tiny single-unit buildings for single tenants to high-rise buildings with hundreds of tenants. These commercial property types are classified as Class A, Class B, or Class C commercial space, with A being the most prime type of property, with the highest rents, and in the best locations.
Class A office space is usually newly constructed or recently renovated, along with being located in areas that provide high visibility and foot traffic. Additionally, these properties are often in areas with easy access to major thoroughfares and professional property management companies. Often Class A office buildings will have high quality, high credit tenants occupying the space.
Class B office space is usually older than its Class A counterpart, and can sometimes require further capital infusion to bring it up to par for tenants. The benefit to these properties is that they can be solid long-term commercial investments with excellent returns after relatively minor repairs and updates.
Class C office space is primarily an opportunity for a redevelopment project. The most challenging aspect of Class C commercial property is the often high vacancy rate and less desirable location, making them difficult to market and harder to establish stable rent and income streams from.
One of the other most common types of commercial real estate is retail space. These commercial properties can range from small strip malls of a few thousand square feet to sprawling community centers filled with banks, restaurants, and specialty shops exceeding a quarter-million square feet.
Special purpose commercial property is purpose-built for special use cases, making them hard to use or adapt for other commercial purposes. Examples of special–use commercial properties include car washes, churches, and self-storage complexes. These can also include more commonly seen properties like amusement parks, hotels, music venues, resorts, and sports venues.
These commercial property types can also include mixed-use properties that can serve functions for residential property, restaurants, and retail shops all within the same building. Specialty purpose properties provide a high-quality mix of tenants that typically carry premium rental rates and prominent exposure in high-demand areas that offer solid investment opportunities.
Invest In Commercial Real Estate Safely
First, let’s define what qualifies as commercial real estate property. At a fundamental level, commercial real estate is s Successful commercial property investment can be one of the safest ways to build wealth over time, especially when the commercial properties within the portfolio are deftly selected based on stringent criteria and exacting standards of performance. Carefully choosing a commercial real estate fund for your investment capital can pay off in multiples, so it’s crucial to gain a solid understanding of how a prospective fund chooses its portfolio assets.
What Criteria Does Saint Investments Consider For Commercial Real Estate?
Investing in commercial property can be both a lucrative and stable addition to your investment portfolio. Still, with the recent pandemic, some commercial properties provide a higher likelihood of stronger returns than others. What are some of the commercial property considerations Saint Investment is making in the wake of COVID-19 when curating its commercial real estate investments?
Commercial properties that have been utilized as retail space in large urban areas are expected to transition toward healthcare, grocery, and alternative store niches. In addition, concepts that successfully use an online component have flourished, with food delivery, dry cleaning services, and others.
While office spaces have certainly taken a hit because of the recent pandemic, moving forward as the country recovers, office space vacancy rates and rents are expected to stabilize by the end of 2021 as many companies bring their workforces back under their own roofs. Recovery in office has rebounded significantly, with additional upside expected in the future.
Hotel & Hospitality Properties
A hard-hit commercial real estate sectors include hotel and resort properties, some being predicted to struggle for years. However, in markets where the recovery has been more rapid, these properties are recovering at faster paces.
When it comes to commercial property for real estate investors, warehouse space has the potential to be a top-performer in a fund’s portfolio. E-commerce is driving much of this trend, with experts forecasting 250 million square feet of demand still unmet and ripe for capitalizing on in 2021. Industrial has shown to be extremely recession-resistant over the last several years and is considered a major focus for long-term stability and growth.
Although experts were initially uncertain of the stability of multifamily properties, they’ve proven to be strong performers for commercial real estate investment and they expect that trend to continue as people regain income stability.
When you’re ready to dive into a successful commercial real estate investment realm, get the professional guidance for your investment decisions from the experts in commercial real estate investing — Saint Investment Group. Contact our team today for a free consultation and discover the difference that commercial real estate can make in your portfolio growth, diversification, and income.
Frequently Asked Questions:
How do you evaluate potential commercial real estate investments?
-Market analysis: Understanding the local market conditions, such as supply and demand, rental rates, and economic conditions, is essential in evaluating potential investments.
-Financial analysis: Examining the property’s financials, including current income, expenses, and cash flow, to determine its overall financial performance and potential for future growth.
-Location analysis: Evaluating the location, including factors such as accessibility, visibility, and local demographics, to determine its potential for attracting tenants and future appreciation.
-Due diligence: Conducting a thorough review of all relevant information about the property, including property condition, environmental concerns, and any legal issues, to minimize risks.
-Capitalization rate: Determining the property’s cap rate, which is a measure of its potential return on investment.
-Tenant analysis: Reviewing the quality and stability of current tenants and the property’s tenant mix to assess its potential for steady income.
It is important to consider all of these factors when evaluating potential commercial real estate investments to make informed decisions and minimize risks.
What is the minimum investment amount required for commercial real estate investing?
The amount of money or funds required to engage in commercial real estate investment can vary significantly depending on the investment and property type. For instance, investing in a commercial real estate investment trust (REIT) may require as little as $500, while purchasing a commercial property outright may demand hundreds of thousands of dollars or more. Some commercial real estate investment options offer fractional ownership, allowing investors to own a smaller share of the property for a lower minimum investment. The minimum investment amount will ultimately depend on the nature of the transaction, the investor’s financial status, and the state of the economy.
What is the typical return on investment for commercial real estate?
Investment type, location, and market circumstances all affect the usual return on investment (ROI) for commercial real estate. Returns on commercial real estate investments have typically ranged from 6% to 12% annually, while individual properties may provide higher or lower returns. The return on investment (ROI) can also be impacted by costs like property management and upkeep, which eat away at the ROI.
Keep in mind that individual investment outcomes might vary and that previous success is no guarantee of future results
To get a more precise idea of the return that can be expected from a certain commercial real estate investment, it is wise to speak with a financial counselor.
What are the risks associated with commercial real estate investing?
-Market risk: The potential for changes in market conditions, such as changes in supply and demand or rental rates, to negatively impact the value of the property.
-Tenant risk: The potential for tenants to default on rent or vacate the property, leading to a loss of income.
-Interest rate risk: The potential for changes in interest rates to increase borrowing costs and reduce cash flow.
-Management risk: The potential for property management problems, such as poor maintenance or mismanagement of finances, to negatively impact the investment.
-Environmental risk: The potential for environmental hazards, such as toxic contamination or natural disasters, to impact the property’s value or profitability.
-Legal risk: The potential for legal issues, such as disputes over lease agreements or zoning regulations, to arise and negatively impact the investment.
What are the benefits of investing in commercial real estate?
Investing in the commercial real estate industry can provide several benefits, including potential long-term cash flow from leases, appreciation potential for apartment buildings, diversification of investment portfolio, inflation hedging, tax advantages for things like property taxes, greater control over deals, and the ability to take calculated risks. Overall, investing in commercial real estate can be a lucrative and rewarding investment option for those with a long-term investment horizon.
These are just a few of the risks associated with commercial real estate investing, and it is important to consider these risks and consult with a financial advisor before making any investment decisions.