Did you know that the commercial real estate industry is expected to increase by over $250 billion by 2027? This means it’s a better time than ever before to invest money in commercial properties.
However, not everybody understands how much money they need to have for investing in commercial real estate. Let’s take a closer look at what you need to know before getting involved in the commercial real estate industry in Orange County, CA.
What Are the Different Types of Commercial Properties?
As you might guess, office buildings, retail stores, and industrial sites are all considered commercial properties.
Interestingly, though, many people overlook the fact that apartment buildings with five or more units are also considered commercial properties. This means there is plenty of opportunity in the area to find a great investment property.
Be sure to take your time when searching, though. This will allow you to find the best option for your needs.
How Much Money Do I Need to Invest in Commercial Real Estate?
The amount of money that you need for investing in commercial properties is highly dependent on the type of property that you choose. For example, an apartment complex may require a large down payment and more capital over time than an office building will. Additionally, the size of the property that you choose will affect your investment budget.
In general, buyers need to have a down payment of approximately 20% in order to secure financing. Otherwise, they may not be able to find a lender that is willing to work with them.
Additionally, it’s recommended that buyers have a cash reserve that is equal to six months of mortgage payments in order to cover any expenses or vacancies that may occur.
Where Do I Look for Properties?
Commercial real estate in Orange County is available through local realtors who specialize in the area.
Additionally, there are many online resources available that can help you find properties in the area. It’s important to do your research, though, as many of these sites may not have real-time pricing or accurate data on the availability of properties.
Are There Any Tax Benefits?
Investing in commercial real estate can offer many tax benefits for those who are willing to take the time to understand the laws. For example, depreciation of the property can be used as a deduction on taxes.
Additionally, investors may be able to qualify for 1031 exchanges which allow them to defer capital gains taxes when trading in one investment property for another.
What Financing Options Are Available?
There are several different types of financing options available for commercial real estate investments, including traditional bank loans, private money loans, and bridge loans.
Depending on your financial situation and credit score, you’ll want to look at all of these options to see what best fits your needs. Your loan history will also play a large role. If you had issues repaying commercial loans in the past, it will be more difficult to secure financing.
What Other Costs Should I Consider?
When investing in commercial real estate, it’s important to factor in all of the associated costs that come along with owning a property. These can include property taxes, insurance, maintenance, and repair costs.
You should also consider utilities and legal fees. It’s important to go over each of these costs with your financial advisor before making any decisions. This will help you avoid complications in the future. P
What Type of Return Can I Expect?
The returns that you can expect from investing in commercial real estate are highly dependent on the location, type of property, and other factors.
Generally speaking, though, it’s not uncommon to see an annual return of 6-7% on your investment. This is contingent upon multiple factors like the local market, the condition of the property, and how well you manage the rental income.
What Are the Different Ways I Can Invest in Commercial Real Estate?
One of the most common ways to invest in commercial real estate is by purchasing a property outright and renting it out.
Alternatively, you could invest in a real estate investment trust (REIT), which allows you to own shares of multiple properties while still being able to benefit from the rental income.
There are also syndications that allow multiple investors to pool their money together and purchase larger properties. This is great for those who don’t have a ton of capital to work with.
Many people find they benefit the most when they have more control over their investments. So, take this into consideration. Group-based investments might not always be the best choice.
What Should I Do When I’m Ready to Invest?
Working with the right commercial real estate brokerage is essential when it comes to finding the property that is best for you. When searching for one, make sure to look for an experienced team in the Orange County, CA area.
They will be able to guide you through the process, helping you to find the right property and obtain the financing that you need. Keep this in mind when looking for Orange County properties.
Investing in Commercial Real Estate Doesn’t Have to Be Overwhelming
Initially, investing in commercial real estate may seem daunting. The good news is that the guide above has everything you need to know to make the process simple.
Looking for more information about what we can do? Reach out to us today to see how we can help.