Commercial real estate is property that is used for business purposes and can also be a source of income when it is leased out to tenants. The main categories of commercial property include office buildings, retail stores, warehouses and laboratories. There is also a category for specialty commercial properties like mixed-use or special purpose buildings and a broad category of hospitality space that includes hotels and resorts. Additionally, there are many types of commercial real estate that do not fit into any of the above categories. These can include medical office space, land, parking garages and even manufactured housing units.

In general, commercial real estate can provide higher returns than residential property investments but the higher returns come with heightened risks. For example, tenant turnover is a big risk for commercial landlords because it can mean lost rental income. In addition, the upfront investment required to buy and maintain commercial property is typically much more than that of residential property. Read more

Another notable characteristic of commercial real estate is that it is often structured with net leases, which shift some or all of the property expenses to the tenant. This can significantly reduce a landlord’s cash flow and increase their financial exposure.

Despite these additional risks, there are a number of benefits to investing in commercial real estate. It can be an excellent way to diversify a portfolio, and it is often less volatile than the stock market. Commercial real estate is also an excellent source of passive income. However, it is important for investors to understand the different types of commercial property and the unique risks associated with each before they make any commitments.

The first thing to consider when determining whether or not you want to get into commercial real estate is where your capital will come from. It is recommended that you have other investors who are willing to go in on the deal with you or at least provide some form of crowdfunding before diving into the world of CRE. It is also helpful to have a business plan that clearly outlines your objectives and how you will achieve them.

When getting started in commercial real estate, it is best to work with an experienced broker. These brokers are licensed to sell and purchase commercial property, and they act as an expert intermediary between landlords and tenants. They are responsible for marketing available commercial space, and they also negotiate the terms of leases to ensure that their clients get the most bang for their buck.

In addition, they may assist with property management services or debt financing. When working with a broker, it is important to determine which side of the transaction they will be on. If they are on the sell side, their responsibilities focus on putting together an Offering Memo and marketing the property to prospective buyers. On the buy side, they will focus on identifying and evaluating commercial spaces that meet their client’s requirements.