There’s a reason most real estate investors get their start in residential real estate, rather than commercial real estate investing: Its lower price point, ease of financing, and relatively simple management means it’s far more accessible for the everyday investor. So why don’t more jump into commercial real estate to begin with? It’s expensive.
Commercial real estate is an asset class often reserved for accredited investors who have the experience and money to back purchases in the hundreds of thousands to millions of dollars at a time. But thankfully, investors no longer have to wait years to decades to build up a sizable enough portfolio to trade up. Instead, there are a number of ways everyday investors can participate in commercial real estate for far less time, money, and effort.
Breaking barriers to commercial real estate investing
Real estate investment trusts (REITs) are by far the most popular method of investing in commercial real estate in an affordable, hands-off manner. There are real estate investment trusts for every asset class in commercial real estate, including real estate debt. Investors can purchase shares in these companies, which provides access to investment-grade commercial properties in a diversified geographic area that is professionally managed. Not every REIT is a winner, meaning investors need to conduct their due diligence on the company and the market opportunities carefully before investing.
Crowdfunding real estate has grown into an increasingly popular method of investing in commercial real estate without having to put massive amounts of capital or time into underwriting and managing the investment. Various crowdfunding platforms will host different investment opportunities for funding. The investment is managed by a third-party sponsor, who is responsible for overseeing the investment and pays an agreed-upon rate of return or profit split to the participating investors.