As many investors know Commercial Real Estate has high a potential to provide huge income to brokers or investors themselves. In fact, any investor who wants to start a new venture will definitely come across this CRE because of its lucrative returns. However, keep in mind that all investments must have the right knowledge and guidance. Let's take a look at the guide on how to venture into this commercial real estate investment.
Now, one thing I tell everyone is to learn about real estate. Repeat after me: real estate provides the highest returns, the greatest values, and the least risk. - Armstrong Williams
Commercial Real Estate (CRE) is one of the parts of investment in real estate investment. What differentiates it is the type of property but the rest is an investment that carries the same concept. What is interesting about this CRE is that the building or property has a commercial status. Indirectly carries a different value to other types of properties such as residential, industrial, and land. When talking about commercials, this commercial carries the meaning of being involved in trading and making or intending to make a profit. So, this CRE investment clearly shows the main reason why it is among the types of investments that investors are interested in. This is because the value of such commercial properties can provide a steady profit. Before that, let’s take a look at the types of commercial properties first.
Types of Commercial Real Estate (CRE)
Although CRE is part of real estate investment, CRE also refers to a general term for several types of commercial real estate. As a rule of thumb, most investors know that these CREs are typically used for business purposes. There are approximately 5 types of commercial space in this commercial real estate investment, among them are:
Office space - The space in a building to be used as an office. Often there is a lot of specially designed and built office space in any building erected by developers and investors. This office space is usually to meet the needs of the surrounding area such as the city center where many new companies are established.
Retail spaces - Retail space refers to shop space, whether leased or owned. Its main purpose is to promote, sell or distribute goods and services to consumers. An example of this retail space is like the strip malls, malls, or single retail spaces.
Industrial - Examples of industrial commercial spaces are warehouses, data centers, manufacturing buildings, or self-storage and these buildings will often be filled and equipped with plants and machines to carry out the manufacture or processing of materials to produce products.
Special purpose - This special-purpose refers to the various types of use of the property, either for public or private use. What is certain is that for special purpose use, there must be a high demand so that it can be used to the maximum. Examples are to build places of worship (mosques, churches, temples, etc.), bowling alleys, daycares, hotel lodging, or health care centers.
How to get started into Commercial Real Estate (CRE)?
Wanting to venture into any type of investment with full commitment and patience requires a piece of very wide knowledge and long experience. Sometimes based on the stories of savvy investors in investing, they need at least 7 to 10 years before owning or being able to make the investment they want. So here are some start-up tips shared by investors who venture into commercial real estate investing before they finally own their own commercial brokerage.
#1 Know the basic knowledge of CRE.
The first step that needs to be done is to know and understand this CRE in basic beforehand. This basic knowledge will be able to guide new investors to easily understand how these CRE investments are performed or work. It can be done by searching for information through popular investment websites, referencing videos on video platforms such as YouTube, or finding out from people who are already skilled in this CRE investment. Having the basic knowledge is enough to know about the pros and cons, risks, and types of CRE.
#2 Go get a real estate license.
Obtaining a real estate license is a major start and door opening for any investor in this CRE investment. To obtain this license, investors need to spend years learning the ins and outs of leasing and managing commercial properties in order to become successful real estate investors. Investors need to know some knowledge such as how to find tenants, manage the brokers, and management as a whole. Having this license will also provide an opportunity for investors to generate money while learning about the investment aspect by earning commissions from helping other investors stabilize and manage their properties.
#3 Work for a developer firm.
Developer firms and investment companies have different approaches to commercial real estate. Developer firms are more opportunistic where they are more open to taking on any type of project as long as it makes financial sense. Inside the firm, the developer also has the opportunity to be exposed to value-added projects, new construction, leasing high vacancy properties, managing stable assets, etc. So, getting the opportunity to work in a developer firm no matter if it is a large or small company will still provide benefits because it will provide opportunities and you can learn to organize investment and development projects in various types and asset classes.
#4 Be wise about creating networking.
Not many people know that building great networking is one of the efforts to succeed. However, investors already know that great networking will be able to give them benefits so usually those who are in the world of investment will certainly have many contacts whether they have a high status or some are still green in the industry. Building networking means investors are able to brand themselves and their business to others. This is because the more people get to know, the more opportunities there will be.
If given the opportunity to build networking with those who are professionals in the industry, investors will be able to generate higher income. In addition to earning a high income, this networking will also help to manage projects, provide opportunities, and can be one of the investors in the deals offered. Among the groups that investors need to have the networking are architects, lawyers, commercial brokers, developers, engineers, general contractors, etc. The only main point in building networking is trust. Creating trust in the people around you as well as your own team is very important to be one of the successful and reliable investors.
#5 Make the most of educational opportunities.
While seeking new knowledge and experience in this CRE, do not forget about other educational opportunities. Throughout the journey of becoming a successful CRE investor, always look for any opportunity to continue learning. It may be a bit difficult for new investors to get enough, accurate and true information about CRE, but there are a number of other ways that can still be used. Among them is by taking a Certified Commercial Investment Member (CCIM). CCIM is an institute that builds opportunities in this CRE through its educational programs. In the programs they offer, investors will definitely gain new knowledge such as how to underwrite investments, analyze the market, negotiate, and more.
Apart from CCIM, there are also several international or local institutes that offer classes and knowledge in the field of CRE. When enough knowledge is gained along with enough experience, then it is permissible to take a Real Estate Negotiator (REN) license. REN license is an identification tag issued to real estate negotiators (REN). To obtain this REN license, he/she needs to attend a two days course called Negotiator Certification Course (NCC) by any approved training provider (as listed on the BOVAEA website). Once it is approved by BOVAEA, a REN tag will be issued and delivered to him/her. This license will indicate that the person is a qualified professional with the appropriate accreditation to work in the industry.
In addition, investors can also find information through books related to real estate investing or find information using podcasts. Now, there are many platforms that provide this podcast by bringing interesting topics about this CRE. Not only that but there are also many new channels that bring up issues about CRE in the form of videos on YouTube. Regardless of the number of blogs about real estate investing that are always up to date and provide a lot of information and accuracy. So, investors can use as many educational platforms as possible to prepare themselves to venture into this field of CRE investment.
Final thought.
Commercial real estate is a very attractive asset class. This is because investors can invest in properties with a variety of different income streams. For example, if an investor loses a residential tenant, then the investor will lose the entire source of income. In contrast to this CRE because often in CRE investments the investors have several different units of commercial real estate and indirectly the investors still have additional sources of income to compensate for any vacancies. Isn't it a more stable investment? However, CRE is not one of the starters for investors because, with the high cost of real estate, more money will be needed for the down payment as well as more difficulty to get a loan. However, not everyone knows that to venture into CRE investment is not a difficult thing if there is effort, patience, and consistency. What's more, this CRE investment will be able to provide an excellent income stream for investors who want to invest passively or actively.