Passive Investing In Commercial Real Estate

Passive Investing In Commercial Real EstateAs you consider expanding your investment portfolio it’s important to diversify. Don’t overlook the opportunities commercial real estate presents for long-term, passive income. It may seem impossible to have commercial property exist as an asset with little to no work for you, however, you can minimize your involvement with the help of a property manager. When you hire the right team and invest in thriving areas commercial real estate is an excellent passive investment opportunity.

Even with the recent remote work trends, a 2020 study from Jonathan I. Dingel and Brent Neiman estimates that 63% of U.S. jobs require significant onsite presence. Commercial real estate remains somewhat a recession-proof investment worth considering.

How Passive Investing Works

There are two ways passive investing generates returns: income and appreciation. Income includes the monthly rental income collected from tenants. This is generally divided between the property owners/investors. A lower risk option for obtaining passive income is to take over a fully leased commercial property and work to retain the current tenants at market lease rates or higher.

Appreciation is the increase in the property’s value over time, based on market conditions, improvements made to the property, or quality management of the property. For most investors, the big payout comes when the property is sold or refinanced.

Read more about property appreciation on our blog post Do Investment Properties Always Appreciate?

Commercial Real Estate is Ideal for Passive Investing 

Commercial real estate is a fantastic option if you invest with a group of partners because it offers the potential for larger properties and these types of properties usually have a more consistent cash flow than residential real estate. Not all commercial real estate is equal and it’s best to work with a local real estate broker that specializes in the product that you are interested in, to understand what types of property will best serve a community. For example, it may cost more to invest in a flex space property, or a medical building, but the payout can more than make up for the expense. The higher price tags for the properties also deter competition so you don’t have to compete with as many investors.

However, the key thing about commercial real estate is the tenants. Instead of relying on rent from residential tenants, whose leases usually last about a year, businesses who rent your property are devoted to longer leases, usually 3, 5, or as long as 10 years, in the Melbourne Palm Bay FL marketplace. A company has more at stake with paying timely rent than a resident. Their business depends on customers knowing where to find them! This provides you with a more stable income and gives you a safety net you might not have if you invest in residential properties.

If you are looking to expand your passive income portfolio contact Ullian Realty. Our expert team will guide you through the process of finding the best commercial property for your investment goals. Learn more about the Ullian Team by giving us a call today.