Steps to investing in commercial real estate

On Behalf of | Aug 2, 2018 | commercial real estate

Individuals in Florida and throughout the country may be able to generate wealth by investing in commercial real estate. However, it is important that a person thoroughly vets a property prior to putting money into it. Investors should also know that commercial real estate is generally illiquid, which means that they will need to see a warehouse or other property as a long-term investment.

Those who are worried about their near-term cash needs could gain exposure to commercial real estate by investing in a REIT. They are traded like a traditional stock, and they come with dividends of up to 90 percent. It may also be possible to gain exposure to commercial property through a self-directed IRA. Ideally, a person will have about 20 percent of his or her portfolio in real estate. This number can vary depending on an individual’s goals and investment timeline.

Buying a shopping mall, apartment complex or other commercial space may allow a person to generate revenue in multiple ways. First, a person may collect rent checks from tenants who occupy that space. Additionally, the building may also appreciate in value over time. It may also be possible to use the building as collateral for loans to buy other assets that may appreciate in value.

However, any investment may come with risk, and it can be a good idea to discuss the purchase of a commercial building with an accountant. An attorney may also need to be part of the investment team. Legal counsel may be able to review a purchase contract or help facilitate the due diligence process prior to the purchase becoming official. Due diligence may include making sure that there aren’t any zoning or title issues.