Types of Commercial Real Estate to Invest in

Commercial real estate encompasses a large number of asset classes, including retail, office, mobile home park, RV park, apartments, billboards, industrial, self-storage and raw land. Each of these asset classes encompass their own unique characteristics.How will you know which class to invest in? With the utmost care , you will see which class has the most promise, and which one will not be all that beneficial to you. Commercial real estate is not all equal, this means you have to devote yourself to grab the most profitable deal you can.

Let’s discuss some of the options available to investors.

Highest Yields

Different assets classes have different average rates of return. Right now the highest-yielding forms of commercial real estate are mobile home parks, self-storage facilities, billboards and RV parks. These trade for around a 10% cap rate or more. At the lower end are apartments, retail, industrial and office, which trade at single-digit cap rates. Raw land, as it is non-income producing, has a 0% cap rate(or even negative when you include insurance and property tax).

self storage commercial real estate devleopment

Diversification

The classes that have the best portfolio diversity are those with a high number of tenant occupancy, which include mobile home parks, RV parks, billboards, apartment complexes and self-storage facilities. The risky classes are the properties that do not have what would be classified as high number of tenants including retail, office and industrial.

Capital Calls

A capital call is when there is a substantial amount of extra money needed to repair or renovate a commercial property. This can range from nothing to a very large amount of money. The class that will not need any additional capital infusion after you have completed the purchase are mobile home parks, RV parks, billboards and self-storage. The assets that will require high sums due to needing renovations and repairs are office, apartment, hotel and industrial, in other words any large big buildings that may need an upgrade at some point.

Growth Prospects

As we are recovering from covid and the economic crisis, we have learned that some shifts are happening, As are several commercial real estate classes evolving based on large trends and market forces. Giant influences such as the internet, the baby boomers, migration patterns, overseas outsourcing, changes in inventory control and the basics we go about in our daily lives , are having a huge effect on commercial real estate. The classes that appear to be having the best future right now appear to be mobile home parks (affordable housing demand trend), billboards (greater commutes), RV parks (19 million retiring baby boomers), self-storage (economic upheaval has caused even greater demand for storage), and apartments (dislocated homeowners are becoming renters). Classes that are on the wrong side of the trends are retail (more consumers shopping on-line), hotel (on-line meetings are replacing face-to-face), industrial (more manufacturing being outsourced overseas and less inventory kept on hand), office (more employees working from home on-line) and raw land (less U.S. development).

Lower Down Payments

Looking for the asset that will offer a reasonable amount of capital are mobile home parks, RV parks, and billboards. We can do this due to the initial cost, all while also factoring in plentiful seller-financing from the owners.Based on the size of the deal it is a general rule, you will need 25% to 30% down on most forms of commercial real estate –excluding those that offer seller-financing, which has been known to range from 10% to 20% down.

Availability of Bank Debt

As any and all commercial real estate investors already know leverage is vital to your process. The classes that will offer the most bank financing are mobile home parks, apartments, retail, office and self-storage. The more difficult classes to get a bank loan are billboards, RV parks and hotels. Raw land is at this time next to impossible to find financing for.

Casey Development, Ltd: Commercial Real Estate Developers in San Marcos, Texas

Commercial real estate has proved to be the most profitable form of real estate in which to invest. Casey Development, Ltd. has to experience to point investors towards the best niche fit, that will allow them to earn a high return on their investment. To learn more about our commercial real estate development services in San Marcos, use the form on this page here to get in touch with our team.