As a real estate investor, you may want to branch into commercial real estate. But the first question on your mind is probably whether now is a good time to invest in this type of property. While you may want a simple “yes” or “no” answer to this question, whether you should make the leap and invest in commercial real estate always depends on multiple factors.
• The Property Type – Generally speaking, you can classify commercial real estate into five main sectors: retail, multifamily, industrial, special purpose, and office. The profitability, yield, and supply and demand of all property types varies greatly. Before you invest, research the performance of each property type in your current market.
• The Market Area Supply & Demand – One of the most important things to understand before you make any type of real estate investment is that every market varies. Every geographic area has its own supply and demand level for different property types. Although on a macro level some property types may do better than others, this may not be the case in your specific area.
• Market Cycles – Broader economic factors, like GDP, the unemployment rate, and the current health of the economy can all affect the profitability rate for commercial real estate. Do some research into market cycles in your area – this can prevent you from buying when the market is too high and then having to sell the property at a market low point.