Home » Blogs » What You Need to Know Before Investing in Commercial Real Estate

What You Need to Know Before Investing in Commercial Real Estate

Commercial retail space available sign.

Nobody can deny the appeal of investing in commercial real estate. It’s a promising venture with plenty of potential to yield significant returns, not to mention additional passive income. But before you make an offer on the first commercial property you see as you explore Gulfport MS real estate, here are a couple of things you should take note.

Not all commercial properties are the same (nor are they equal)

Commercial real estate, not just in Gulfport MS, but just about anywhere, comes in different forms and types. There are five general categories: retail, industrial, multifamily, office, and special purpose. Each of these categories branch into smaller sectors that cater to increasingly specific needs and purposes.

For instance, retail properties can be malls, community centers, individual shops, or mixed-use developments. Meanwhile, industrial properties can come in the form of manufacturing centers, warehouses or distribution buildings, data or web hosting centers, show rooms, and research and development buildings. Then, there are the hospitality properties which can be hotels, resorts, and bed and breakfasts.

The potential for each investment property depends on several factors which lead us to the next thing you need to know.

Every market is different

The local market’s supply and demand plays a huge role in determining the investment potential of a commercial property. In some places, industrial properties are king, while other markets place more value on retail spaces and multifamily real estate.

Before you invest in commercial real estate, do your market research. Identify parts of the market where there’s an oversupply and sectors that have increasing demand for spaces. If you and your real estate agent find an undersupply of a certain commercial property type, hold off and do a feasibility study first.

Local economic factors should also be part of your market research. This includes the leading industries in the area, the local unemployment rate, and the gross domestic product. The overall health of the economy will affect the success of your investment.

You can invest in commercial real estate through other ways

Buying a commercial property upfront is not the only way to invest. If you want a more passive role, you can invest in real estate investment trusts (REITs). You can also band together with a group of other investors and participate in real estate crowdfunding.

Real estate investment trusts or REITs is a company that operates similar to a mutual fund, where you and investors can pool your resources in order to invest in real estate assets. This can be an option if your investment goals are loftier than your current financial capacity. You can diversify your investment portfolio and grow your income without spending a fortune. Read more about REITs here.

Real estate crowdfunding is relatively new to the scene. Like a REIT, you pool your resources with other people to invest in real estate. Unlike a REIT, however, real estate crowdfunding is usually concentrated on a specific investment, not a portfolio. You can learn more about real estate crowdfunding here.

Inspection isn’t just limited to a property tour

Just like in residential real estate, inspections are important when buying a commercial property. But your due diligence doesn’t end there. There are a lot more things to do to make sure you’re investing in something worthwhile.

Aside from property tours, you and your real estate agent need to do feasibility studies and surveys. Paperwork should also be reviewed, and you can be sure there will be a lot to look at. Documents such as tax returns, profit and loss statements, and other necessary paperwork must be carefully analyzed. You don’t want to miss a detail that might end up as an expensive mistake.

If you are planning to invest in commercial real estate through crowdfunding or REIT, you also need to vet the REIT or the people you’ll be working with. Ask for referrals from trusted professionals, check the background of the REIT or the people in the crowdfund, and study their track record. You’ll want to work with an REIT or a group of investors who can be trusted and are experienced.

You’re on the right track

There’s more to learn about investing in commercial real estate in Gulfport MS. Owen & Co. Real Estate would love to help you out. Connect with the team today at info(at)owenandco(dotted)com or get in touch through this page to talk to an experienced Gulfport MS realtor you can trust.