Looking to invest in commercial real estate? You’re in good company. As the market for both residential and commercial real estate investments continues to experience unprecedented growth, both casual investors and established business owners seek to expand their holdings and to diversify their investment portfolios. Recent studies indicate that American commercial real estate is worth approximately $950 billion, and investors across the country are more than ready to commit their — sometimes considerable — resources. Considering foreign investments? It may be wise to consult with a real estate investment team.
There are, of course, privately-held REITs, or real estate investment trusts, that can offer guidance — along with an attractive ROI — to new investors. REITs have existed for nearly 60 years, and are required to pay at least 90% of their income back to shareholders. Some REITs are publicly traded, but may be unlisted or “private.” Similar to mutual funds, REITs have been established around the world and holdings can include hotels, apartment buildings, retail stores, or even hospitals. Professional real estate investors typically have decades of experience — and a track record of success — and can help novice investors manage their decision-making.
Success, of course, is not guaranteed: there is currently more than $150 billion in commercial real estate that is rapidly headed for foreclosure, but forward-thinking investors should seek to capitalize on valuable properties as they become available. Aligning investment decisions with those of expert real estate investment firms — and taking advantage of professional investors’ experience and insight — should be a step that potential investors take well in advance of any purchase. Real estate investment experts exist to provide guidance, feedback, and direction to their clients.
Before committing to any commercial real estate purchase or lease, investors should take the time to ask themselves, “Should I invest in real estate?” Although some REITs focus mainly on purchasing and expansion, there are just as many that both own and operate the properties they purchase. After allowing for routine expenses associated with repair and maintenance, investment firms can expect near-continuous income from tenants over the course of many years. The rate of vacancy for commercial properties — especially in larger urban areas — gets lower each year, meaning that investors who are willing to caretake commercial properties could see a much higher return on their original investment than they expected.
The question that novice investors have to ask themselves should shift from “Should I invest in real estate?” to “Why invest in REITs?” While real estate investment firms understand the intricacies of the marketplace, newer investors may not be fully apprised of larger market trends. For example, the trend toward urgent care is currently revolutionizing the American commercial real estate market. Although hospitals and larger medical facilities remain solid investments, there is also great financial reward available to doctors who operate more accessible “walk-in” clinics. Often located in shopping malls and close to schools, urgent care walk-in medical clinics number fewer than 7,000 across the United States, a number that could easily double or triple in the next 10 years.
Should I invest in real estate? The answer remains a resounding “yes,” and investors should take care to follow the measured guidance of verified, well-established real estate partners. Small business owners will always need space in retail stores, and doctors will always need to have space to meet with patients. Certain investments are much lower risk than others, but without input from experienced REIT managers, how can the casual investor make lasting, rewarding investment choices?
Should I invest in real estate or biotechnology startups? Should I seek to own and operate or should I contract with an outside management team? Can I truly find success as an investor in either residential or commercial real estate? For an in-depth risk/benefit analysis, potential investors are strongly advised to meet with professional real estate partners.