It's no secret that investing in real estate can lead to long-term financial rewards. For most, investing in real estate involves becoming a landlord and renting out residential properties.
But, for some, the prospects of commercial real estate investments are calling their name. And with good reason!
In partnership with CrowdStreet, let’s explore exactly how to invest in commercial real estate. If you’re not familiar with CrowdStreet, they're a platform that allows accredited investors to invest in commercial real estate for as little as $25,000. Check out CrowdStreet here >>
What Is Commercial Real Estate?
Commercial real estate is a property that is used for business purposes -- it provides a workspace or place for business operations.
The world of commercial real estate is varied and vast. The options for investments within commercial real estate are expansive. But a few types of commercial real estate that come to mind include apartment buildings, shopping malls, office parks, storefronts, restaurants, hospitals, hotels, and more.
Why Invest In Commercial Real Estate?
As an investor, you’ll need to decide for yourself whether or not commercial real estate should hold a place in your portfolio. But the opportunities within this multi-billion dollar marketplace are expansive.
Although the commercial real estate market experienced a volatile 2020 in the face of new working arrangements resulting from COVID-19, the commercial real estate landscape changes leave room for new opportunities in the coming years.
How To Invest In Commercial Real Estate
Want to invest in commercial real estate? Here’s how to break into this new field.
CrowdStreet is the leading online real estate investing platform that focuses on the commercial market. Since its inception in 2014, the community of investors has funded nearly 500 deals.
In order to work with CrowdStreet, you’ll need to be an accredited investor. That means that you’ll need to meet one of the following criteria:
If you meet the criteria of an accredited investor, you’ll be able to work through CrowdStreet to invest in commercial real estate. When you invest in a deal on the CrowdStreet Marketplace, you’ll need to invest a minimum of $25,000, although that amount can vary by project. With that minimum investment, you can choose to invest in a real estate fund or an individual project.
CrowdStreet offers a wide range of investment opportunities in commercial real estate. Plus, it opens the door to experienced investors that are interested in commercial real estate but don’t have the funds to enter the arena on an individual basis.
Want to learn more about CrowdStreet? Take a look at our full review.
Find A Private Syndicate
CrowdStreet is one of the easiest ways to invest in commercial real estate. And for someone new to commercial real estate, it’s helpful to have their expertise to help evaluate deals.
But it isn’t the only way to be a limited partner in a commercial real estate deal. You may also be able to join a private real estate syndication.
Ideally, the general partner will have substantial commercial real estate knowledge. There may also be less costs associated with a private syndicate (but not always).
However, there is "sponsor risk" as you're trusting the general partner with your money. And that can be risky if you aren't sure how to properly vet them.
Go It Alone
It's technically possible to go it alone with commercial real estate. However, it can be an expensive and risky proposition when you're just getting started.
The fact is, most commercial real estate properties simply cost far more money than residential real estate investments. And the lending process can be much more complex.
So if you're not interested in binding together with other investors, you may want to get your feet wet with residential real estate first. If you later decide to go it alone with commercial real estate, take the time to do your research about the types of properties that might work well for your portfolio.
Commercial real estate can be an exciting opportunity to build wealth. With the advent of crowdfunding platforms like CrowdStreet, you have the opportunity to access commercial real estate deals that would otherwise require more substantial upfront capital.
If you’re ready to dive in and take a look, sign up for CrowdStreet and see what deals may be interesting to you. Open an account here >>
CrowdStreet, Inc. ("CrowdStreet") is a content partner of The College Investor.
The information contained herein or presented herewith is not a recommendation of, or solicitation for, the subscription, purchase or sale of any security or offering, including but not limited to any offering which may invest in the geographic area(s) or asset type(s) mentioned herein, whether or not such offering is posted on the CrowdStreet Marketplace. Though CrowdStreet believes the information contained and compiled herein has been obtained from sources believed to be reliable, CrowdStreet makes no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the subject thereof. All projections, forecasts, and estimates of returns or future performance, and other “forward-looking” information not purely historical in nature are based on assumptions, which are unlikely to be consistent with, and may differ materially from, actual events or conditions. Such forward-looking information only illustrates hypothetical results under certain assumptions.
CrowdStreet is not a registered broker-dealer or investment adviser. Nothing herein should be construed as an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet or otherwise. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.