When it comes to investing, you can choose the easy route, such as saving in a bank account. Or you can choose something more complicated, such as trading in the stock market. Another option is real estate investment.
When it comes to real estate investment, there are five main categories. One of those is commercial real estate. In this blog, we’ll explain how to get started on your commercial real estate journey.
Why Invest in Commercial Real Estate?
Investing in commercial real estate, that is CRE, offers some benefits that don’t come with other investment options. Some of those benefits include:
Protected from fluctuations in the market
Includes a “lock-in” period to protect your investment while guaranteeing returns
A piece of commercial real estate in a prime location can be a great money maker because it will be in demand
How to Get Started in Commercial Real Estate Investment
Now that you know why you should get started in commercial real estate investment, let’s take a look at how to get started.
This type of investing can be done by an individual, but often, the cost of commercial real estate makes it difficult. The most popular method of commercial real estate investment is through fractional ownership or REITs.
REITs function a lot like mutual funds. There is a manager and your investment is part of the pool this is divided across a variety of assets. the fund manager chooses the assets based on their past performance and the current market climate. The returns are combined into an account and then distributed to investors based on their investment. For example, if your portion is 10% of the investment, you would get 10% of the returns.
Fractional ownership helps to convince like-minded investors to pool their money to own part of an asset-based on their risk tolerance. Investors can invest in one or more portions of the asset, which grants them that much ownership. Returns are paid out based on the percentage of ownership.
The primary difference between the two is this: in a REIT, a portion of your investment may be in an asset that doesn’t attract tenants for various reasons. The only way to keep your investment from being an expensive paperweight is to withdraw from it.
Fractional ownership, on the other hand, allows you to remain in control over where your investment goes. You can remain invested in assets that are making a profit and stop, sell, or trade ownership in assets that are not making a profit.
Commercial real estate investment is a great option if you have the funds and the risk tolerance to do it. Of course, there are safer ways to invest as well. Contact Rexford Commercial Capital today to learn more about real estate investment. We can help you decide if it is right for you and your portfolio.