Passive commercial real estate investing

Typically, passive investors utilize online platforms to indirectly invest in mortgage loans and remotely invest in a property. EqualSeat is a very popular choice. Invest in Real Estate Funds A type of mutual fund, a real estate fund invests in public real estate securities. Unlike REITs, real estate funds provide profits through appreciation, not dividends, and are more diversified.

Partner with an Active Investor Partner with someone who is interested in taking an active role in a commercial property. They can act as the managing partner, taking on the in-person tasks, allowing the other party to passively invest. In most cases, passive real estate investing is a long-term play to grow wealth. Passive investors also typically see lower returns than active investors. But it is a great option for those with little experience in the commercial real estate market.

Essentially, investors must weigh the benefits and drawbacks of passive real estate investments against active investments. Is it worth it to watch money grow year over year with little involvement? Or would you rather see potentially more rapid-growing returns on self-managed properties? Our multifamily real estate investment strategy is focused on acquiring opportunistic properties in need of moderate to heavy rehab, with a mid- to long-term investment horizon.

Crowdfunding — Crowdfunding allows a developer or deal sponsor who has identified an attractive investment to raise the necessary capital from individual investors in exchange for financial interests in the project. Most crowdfunding deals are focused on a specific property. REITs and real estate mutual funds — These professionally-managed funds are typically traded publicly and can hold a variety of investments, such as stocks and bonds of real estate companies and direct investments in properties.

Considering a passive investment in multifamily real estate? In other words, successful passive investing demands careful vetting of funds and sponsors. If you believe a passive investment in a multifamily real estate fund may be the right fit, we recommend considering the following points when determining where to place your hard-earned dollars: What is the investment strategy? Disciplined execution of said strategy is equally important.

Consider the historical risk-return profile, especially during challenging phases of the economic cycle. How can you monitor your investment? Trust is paramount in passive investing, much of which is derived from transparent reporting. Successful passive investors place a high value on receiving regular communications featuring key metrics and qualitative updates.

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In a triple net lease scenario, the property owner is not responsible for paying any expenses, such as taxes, insurance, utilities, etc. Like this project one of our clients purchased in Chattanooga. Landlords will solely be responsible for paying their mortgage on the property.

Talk about a win for the investor. Forced Appreciation of Value One of the biggest differences between residential and commercial real estate is how property values are determined. Residential real estate is largely influenced by comparable properties, so your single-family investment will only go up in value as properties nearby sell for a higher price.

Forced Appreciation. By curating the right tenants and leases, you can create stronger cash flow and higher values. Businesses can afford to pay much higher rents than individuals and sign longer term leases, so less consistent turnover for commercial investors. REIT Index. As an investor, commercial property can give you lower turnover costs and vacancy rates.

These long lease terms give you more reliable passive income and less of a headache by not having to market a property from year to year. There are five primary types of commercial real estate that you can invest in: multifamily, office, industrial, retail, and hospitality. The multifamily asset class includes everything from a duplex with two tenants to apartment buildings housing hundreds.

These types of units are fairly commonplace in all markets across the United States and may have been originally constructed for multiple tenants or renovated over the years for such accommodations. This type of multifamily is often found in the suburbs where they can be spread out and offer surface parking.

There is usually a collection of these apartment buildings on single property, which may share a yard and other amenities. These projects are found closer to the urban core, where a developer can justify elevator service and garage-style parking. Amenities and local conveniences often drive demand for mid-rise apartments.

These apartment buildings are found in the urban core of larger markets, often in and around the heart of the Central Business District. Like mid-rise apartments, these projects are heavily amenity driven with elevator service and garage-style parking.

Student Housing Just like the name implies, Student Housing projects are designed to house college and university students. As such, they are located near educational centers and may be owned by an investment group, as well as universities and colleges. This type of multifamily, like Senior and Assisted Living, has a very different model than the other products in this asset class and requires specialized knowledge. These projects offer their tenants a higher level of support than other types of multifamily, such as on-call or in-house medical professionals, housekeeping, meal service, etc.

Office Office investing can be more capital intensive than other types of commercial real estate due to the cost of turning over and building out space for incoming tenants. However, because of the cap rate valuation on commercial real estate, offices can command some of the highest values. These buildings are often mid to high-rise buildings with structured parking and naming rights on the building. A number of professional services companies prefer to locate within these buildings due to the convenience and walkability factors.

Commercially Zoned Homes Commercially zoned homes are often a favorite for smaller, local professional services companies. Medical Office Medical office space is professional space designed around the needs of the medical field and can be the most valuable and stable in the office world. Tenants here can be any business from your local dentist to major surgery centers and hospitals. Suburban Office Buildings Suburban office space is built outside of the core and typically service parked.

These buildings may or may not have elevator service and can be as large as a mid-rise. Similar to garden-style apartments, suburban office can assemble into office parks with several different mid-rise buildings situated in a campus-like setting. Industrial Industrial properties widely range in size and use. This asset class has taken off over the last economic cycle thanks to the rise of delivery.

These properties are usually regional distribution for various types of products and require strong accessibility for trucks entering and exiting the highway systems. Flex Warehouse As the name implies, flex space is a flexible industrial product that may easily accommodate a wide range of uses. These warehouses usually have at least some portion of office space connected to the warehouse and can widely range in size to fit your small mom and pop plumber to regional granite distributors and more.

Heavy Manufacturing Heavy manufacturing space is often isolated within the most intense industrialized areas of municipalities due to its use of heavy machinery, chemicals, and power necessities. Think of General Motors and DuPont as tenants for this type of industrial product. These properties are often heavily customized for the current user and their specific requirements.

Like flex space, light assembly can also be used for storage and office space call centers, data centers. With the rise in consumer demand for fresher food and grocery delivery, cold storage has increased significantly since Similar to heavy manufacturing, these spaces are build-out intensive and tenant retention can be high. Showroom Industrial showrooms are a bit of a hybrid between retail and warehousing. This product allows manufacturers to showcase their goods in a more retail setting while having shipping and distribution, too.

Showrooms are often situated along interstates where they can achieve high visibility and easy access for consumers. These assets can be both outdoor and indoor climate controlled and can be rented by tenants to store any number of items, from sentimental family mementos to trailers. Retail Retail real estate is intended to house any business that sells products and services directly to consumers.

This real estate asset can range from single, standalone restaurants to massive regional shopping centers. Community Retail Center Community retail centers are often found in the range of ,, square feet. These centers are occupied by one or more big-box retail anchors, such as Kroger, Target, Best Buy, etc. Several smaller retailers will fill in the gaps between these larger anchors, hoping to draw in the same shoppers. These projects are often located out front of large shopping centers with massive draws or situated at high-traffic corners.

Outparcels can house restaurants, pharmacies, etc. Power Center A power center is a shopping center that is very heavily anchored by a major regional retail, such as a Wal-Mart or Bass Pro Shops. In addition to their in-line shoppes, power centers typically have multiple out-parcel buildings. Regional Mall Regional malls can be both indoor and outdoor and feature more specialty, high-end shoppes along with entertainment and restaurants.

These neighborhood shopping centers will typically contain a mix of national, regional, and local small shoppes retail. Hospitality real estate largely exists to serve travelers, both for business and pleasure. These assets can range from your typical drop-in motel to large resorts. Budget Hotels Budget hotels can often be found just off interstate exits and are intended to capture drivers in need of a cheap place to stay for the night.

Extended Stay Hotels Extended stay hotels have larger rooms with small kitchens, intended to serve travelers staying for a week or longer. Full-Service Hotels Full-service hotels are often located within the central business districts or tourist areas and offer a number of amenities, such as room-service and fitness centers, for travelers.

Important Questions to Ask Before You Begin Investing Passively When investing your capital into any venture - whether with a money manager or passively in commercial real estate, you should be asking as many questions as you possibly can to ensure that you fully understand the deal. Is the Operator investing personally? Are they putting their own capital into it? Are they placing at least their minimum ask? As a passive real estate investor, you want to be sure that your operator has skin in the game.

What Are the Upfront and Ongoing Fees? When it comes to investing in general, fees are everything. A deal may look amazing at first glance until you realize all of the fees that the operator is taking for themselves. Fees like a loan guaranty fee, an acquisition fee, an asset management fee, a disposition fee, etc.

What is the exit strategy? Every great investment begins with multiple exit strategies. Sure, you can buy right. You need to be on the same page with the operator with respect to the goals of the deal before you enter an investment.

What will the capital be used for? What are your dollars going towards? If you feel uneasy about the project improvements, say something. If they have a run of successful projects in a similar manner, chances are good that your investment will end up in the black, as well. Given the long-term nature of most passive income investments, investors typically use them as a retirement vehicle, as more people will be less inclined to work over the course of their golden years.

Register to attend our FREE real estate class to learn how to utilize passive income strategies in your local market! Passive Investing Passive investing and active investing represent two sides of the investor spectrum.

Perhaps even more importantly, they represent two different mentalities towards the investment landscape. On the one hand, passive investing — as I already alluded to — will appeal to those who appreciate a more hands-off approach. As you may have already guessed, rental properties represent the epitome of passive investments. Done correctly, and with the help of a property management company, investing in rental properties can produce cash flow with little effort after a proper foundation has been laid.

More specifically, active investors are required to trade time and effort for a return on their investment; their actions are directly correlated to the assets performance. That said, active investors are typically more decisive because their fate is in their own hands.

Getting Started With Passive Commercial Investing Have you ever wondered why so many people are interested in passive investing, especially when it comes to commercial real estate? The reasons may surprise you. The potential to make more money on a given deal is very real, but I digress. That said, done correctly, passive investing in commercial real estate can result in a lucrative payday for savvy investors. In addition to making proportionately more money, you could argue that commercial real estate has a more reliable cash flow.

Tenants in commercial properties, for the most part, are going to be businesses that intend to stick around for a while. They are typically better at paying their rent because, well, their business depends on it. As an entrepreneur investing in passive commercial real estate, you can take solace in the fact that most of your tenants will probably pay their bill on time, whereas single-family rentals run into more issues that threaten their ability to pay.

While the prospects of making more money are certainly on the table, the cost of entry can be too steep for the average investor. The same reason many people consider investing in commercial real estate may actually keep others away, and that bodes well for those that are already committed. Less competition should make it easier to acquire commercial real estate at a better price. Passive investing in commercial real estate has also become synonymous with longer leases.

Whereas most single-family leases will last about year, commercial leases tend to be much longer. It is not uncommon for some commercial leases to last somewhere in the neighborhood of five to 10 years. As a result, passive investing in commercial real estate adds an additional level of safety not seen in single-family properties.

Since leases tend to last longer, vacancies are less of a threat; they are still a threat, of course, but less of one.

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It is entirely possible for investors to passively invest in commercial real estate. Flipping commercial real estate shares many of the same benefits of its single-family counterparts, and more. What Is Passive Investing? Passive investing, as its name suggests, is the act of investing in assets without much — if any — additional investment of your own energy. A passive investment will witness real estate investors trying to maximize their returns while simultaneously reducing their own involvement.

For all intents and purposes, those looking to invest passively are focused primarily on limiting their own involvement in a deal without sacrificing returns. As a result, passive income investing has adopted one prevalent mentality: buy and hold. Given the long-term nature of most passive income investments, investors typically use them as a retirement vehicle, as more people will be less inclined to work over the course of their golden years. Register to attend our FREE real estate class to learn how to utilize passive income strategies in your local market!

Passive Investing Passive investing and active investing represent two sides of the investor spectrum. Perhaps even more importantly, they represent two different mentalities towards the investment landscape. On the one hand, passive investing — as I already alluded to — will appeal to those who appreciate a more hands-off approach.

As you may have already guessed, rental properties represent the epitome of passive investments. Done correctly, and with the help of a property management company, investing in rental properties can produce cash flow with little effort after a proper foundation has been laid. More specifically, active investors are required to trade time and effort for a return on their investment; their actions are directly correlated to the assets performance.

That said, active investors are typically more decisive because their fate is in their own hands. Getting Started With Passive Commercial Investing Have you ever wondered why so many people are interested in passive investing, especially when it comes to commercial real estate? The reasons may surprise you. The potential to make more money on a given deal is very real, but I digress. That said, done correctly, passive investing in commercial real estate can result in a lucrative payday for savvy investors.

In addition to making proportionately more money, you could argue that commercial real estate has a more reliable cash flow. Tenants in commercial properties, for the most part, are going to be businesses that intend to stick around for a while. They are typically better at paying their rent because, well, their business depends on it. As an entrepreneur investing in passive commercial real estate, you can take solace in the fact that most of your tenants will probably pay their bill on time, whereas single-family rentals run into more issues that threaten their ability to pay.

While the prospects of making more money are certainly on the table, the cost of entry can be too steep for the average investor. By curating the right tenants and leases, you can create stronger cash flow and higher values. Businesses can afford to pay much higher rents than individuals and sign longer term leases, so less consistent turnover for commercial investors.

REIT Index. As an investor, commercial property can give you lower turnover costs and vacancy rates. These long lease terms give you more reliable passive income and less of a headache by not having to market a property from year to year. There are five primary types of commercial real estate that you can invest in: multifamily, office, industrial, retail, and hospitality.

The multifamily asset class includes everything from a duplex with two tenants to apartment buildings housing hundreds. These types of units are fairly commonplace in all markets across the United States and may have been originally constructed for multiple tenants or renovated over the years for such accommodations.

This type of multifamily is often found in the suburbs where they can be spread out and offer surface parking. There is usually a collection of these apartment buildings on single property, which may share a yard and other amenities.

These projects are found closer to the urban core, where a developer can justify elevator service and garage-style parking. Amenities and local conveniences often drive demand for mid-rise apartments. These apartment buildings are found in the urban core of larger markets, often in and around the heart of the Central Business District. Like mid-rise apartments, these projects are heavily amenity driven with elevator service and garage-style parking.

Student Housing Just like the name implies, Student Housing projects are designed to house college and university students. As such, they are located near educational centers and may be owned by an investment group, as well as universities and colleges. This type of multifamily, like Senior and Assisted Living, has a very different model than the other products in this asset class and requires specialized knowledge.

These projects offer their tenants a higher level of support than other types of multifamily, such as on-call or in-house medical professionals, housekeeping, meal service, etc. Office Office investing can be more capital intensive than other types of commercial real estate due to the cost of turning over and building out space for incoming tenants.

However, because of the cap rate valuation on commercial real estate, offices can command some of the highest values. These buildings are often mid to high-rise buildings with structured parking and naming rights on the building. A number of professional services companies prefer to locate within these buildings due to the convenience and walkability factors. Commercially Zoned Homes Commercially zoned homes are often a favorite for smaller, local professional services companies.

Medical Office Medical office space is professional space designed around the needs of the medical field and can be the most valuable and stable in the office world. Tenants here can be any business from your local dentist to major surgery centers and hospitals. Suburban Office Buildings Suburban office space is built outside of the core and typically service parked.

These buildings may or may not have elevator service and can be as large as a mid-rise. Similar to garden-style apartments, suburban office can assemble into office parks with several different mid-rise buildings situated in a campus-like setting.

Industrial Industrial properties widely range in size and use. This asset class has taken off over the last economic cycle thanks to the rise of delivery. These properties are usually regional distribution for various types of products and require strong accessibility for trucks entering and exiting the highway systems.

Flex Warehouse As the name implies, flex space is a flexible industrial product that may easily accommodate a wide range of uses. These warehouses usually have at least some portion of office space connected to the warehouse and can widely range in size to fit your small mom and pop plumber to regional granite distributors and more. Heavy Manufacturing Heavy manufacturing space is often isolated within the most intense industrialized areas of municipalities due to its use of heavy machinery, chemicals, and power necessities.

Think of General Motors and DuPont as tenants for this type of industrial product. These properties are often heavily customized for the current user and their specific requirements. Like flex space, light assembly can also be used for storage and office space call centers, data centers. With the rise in consumer demand for fresher food and grocery delivery, cold storage has increased significantly since Similar to heavy manufacturing, these spaces are build-out intensive and tenant retention can be high.

Showroom Industrial showrooms are a bit of a hybrid between retail and warehousing. This product allows manufacturers to showcase their goods in a more retail setting while having shipping and distribution, too. Showrooms are often situated along interstates where they can achieve high visibility and easy access for consumers. These assets can be both outdoor and indoor climate controlled and can be rented by tenants to store any number of items, from sentimental family mementos to trailers.

Retail Retail real estate is intended to house any business that sells products and services directly to consumers. This real estate asset can range from single, standalone restaurants to massive regional shopping centers. Community Retail Center Community retail centers are often found in the range of ,, square feet.

These centers are occupied by one or more big-box retail anchors, such as Kroger, Target, Best Buy, etc. Several smaller retailers will fill in the gaps between these larger anchors, hoping to draw in the same shoppers. These projects are often located out front of large shopping centers with massive draws or situated at high-traffic corners. Outparcels can house restaurants, pharmacies, etc.

Power Center A power center is a shopping center that is very heavily anchored by a major regional retail, such as a Wal-Mart or Bass Pro Shops. In addition to their in-line shoppes, power centers typically have multiple out-parcel buildings. Regional Mall Regional malls can be both indoor and outdoor and feature more specialty, high-end shoppes along with entertainment and restaurants.

These neighborhood shopping centers will typically contain a mix of national, regional, and local small shoppes retail. Hospitality real estate largely exists to serve travelers, both for business and pleasure. These assets can range from your typical drop-in motel to large resorts. Budget Hotels Budget hotels can often be found just off interstate exits and are intended to capture drivers in need of a cheap place to stay for the night.

Extended Stay Hotels Extended stay hotels have larger rooms with small kitchens, intended to serve travelers staying for a week or longer. Full-Service Hotels Full-service hotels are often located within the central business districts or tourist areas and offer a number of amenities, such as room-service and fitness centers, for travelers. Important Questions to Ask Before You Begin Investing Passively When investing your capital into any venture - whether with a money manager or passively in commercial real estate, you should be asking as many questions as you possibly can to ensure that you fully understand the deal.

Is the Operator investing personally? Are they putting their own capital into it? Are they placing at least their minimum ask? As a passive real estate investor, you want to be sure that your operator has skin in the game. What Are the Upfront and Ongoing Fees?

When it comes to investing in general, fees are everything. A deal may look amazing at first glance until you realize all of the fees that the operator is taking for themselves. Fees like a loan guaranty fee, an acquisition fee, an asset management fee, a disposition fee, etc. What is the exit strategy? Every great investment begins with multiple exit strategies.

Sure, you can buy right. You need to be on the same page with the operator with respect to the goals of the deal before you enter an investment. What will the capital be used for? What are your dollars going towards? If you feel uneasy about the project improvements, say something. If they have a run of successful projects in a similar manner, chances are good that your investment will end up in the black, as well.

Inexperienced operators tend to make mistakes with investment capital, as they have less experience managing projects, budgets, and timelines. What Are the comparable properties? Take the comparable properties your operator gives you with a grain of salt.

Who is involved in the deal? What does each individual involved bring to the table? As long as our country continues to grow and real estate needs shift, there will always be demand for new construction projects. You could invest with a local group of contractors and developers that are building anything from single-family residential homes to office towers.