In this article, we will look at 12 ways to make money in commercial real estate and discuss the top methods you can use to make some serious cash in this industry. It doesn’t matter if you are an active or passive investor because all these methods will apply regardless of whether you plan on actively managing your properties or prefer to hire someone else to do it for you. Let’s get started!
How Do You Make Money in Commercial Real Estate
Here are 12 methods to make money in commercial real estate;
- Be Contractors
- Be Property Management
- Start Leasing
- Do Maintenance & Repair
- Start Furniture Moving & Installation
- Do Real Estate Investing
- Other Ways to make money
- Be a Developer in Real Estate
- Be Broker in Real Estate
- Be an Investor in Real Estate
- Buy the Property and Hold It
- Buy Auctioned Properties
You have a few options if you know how to do construction work. First, you can offer your services as a consultant. If someone is building a restaurant, for example, they might want some advice on layout and materials. As a consultant, it’s your job to develop suggestions and help execute them. If they like your input, they might offer you a job working alongside them.
It’s also possible that somebody already working on-site will take notice of your ideas and ask if you want to do more work at their firm. Either way, these gigs are great for getting experience or making connections that can lead to future jobs or clients.
Be Property Management
Being a landlord can be great if you know what you’re doing. But, it also takes a lot of work. If you’re willing to deal with that, then property management is probably one of your best bets for making passive income in commercial real estate. If you’re unsure how property management works, check out our guide here.
Once you’ve got experience managing properties and a good handle on how things work, creating an LLC can be helpful for asset protection and tax advantages.
Keep reading below for more information on creating an LLC: Setting up Your Own Business Entity – LLC vs S-Corp vs Sole Proprietorship (And Which One Is Best for You?)
In most cases, leasing is the best way to generate income from an investment property. Your monthly rent will vary based on many factors, including location, building type and available space. The other benefits of leasing are that it takes little work and can provide a steady cash flow.
However, while they may not require much effort, leases do require commitment: you’ll need to stay involved throughout your lease term for things like tenant retention and repairs if there are issues with your space. This typically means a more hands-on approach than other approaches, such as buying properties at auction or from distressed sellers.
Do Maintenance & Repair
When you own an income property, there’s always something that needs attention. Unfortunately, many people get turned off by maintenance and repairs — but it doesn’t have to be that way. Think of it as an opportunity to increase your bottom line and earn passive income! If you can fix things yourself, go for it; just keep a log to know how much time and money each project costs.
Or hire out at reasonable rates — most of our clients use a handyman service once or twice a month. Whatever your situation, remember that keeping your properties well-maintained is good for business!
Start Furniture Moving & Installation
One of the best ways to make money in commercial real estate is by buying low and selling high. This is a strategy any newbie can employ. It’s not as hard as it sounds, either.
But you should also know that other strategies are available for making serious bucks with a property that might require a higher investment but can help build wealth faster (and, for some, an important aspect of financial freedom).
Do Real Estate Investing
Investing is the best and most obvious way to make money in commercial real estate. Real estate can be a solid investment for passive investors, those who buy a property with little intention of managing it themselves.
Buying into an existing portfolio of multi-family units can be lucrative for those looking for steady income or buy-and-hold investors who will hold onto an asset until it increases significantly. Investing also has the potential for significant returns.
Still, there’s always risk involved when buying properties that tenants already occupy — and any mistakes you might make can cost you hundreds or thousands of dollars.
Other Ways to make money
Whether you’re purchasing an apartment building, parking lot, or other commercial space, you can expect to earn income from it.
First, there are usually on-site tenants who pay rent each month.
Second, most rental units have mortgages associated with them. When you purchase a property and obtain a mortgage loan, you essentially become both a landlord and a lender.
You can also earn money by renting your unused office space to third parties such as freelancers or telecommuters. If you own your own business but don’t have any physical office space, consider working with coworking providers that let users share workspace for just $100/month or less!
Be a Developer in Real Estate
Most people consider real estate a money-making machine; thus, they enter the business as developers. The developer position ultimately leads you to a state of a firm owner, but it is not out of risk. Debt and equity amounts are mostly stacked in their respective capital stacks. But being an authentic developer can make you a millionaire, especially in commercial real estate.
Be Broker in Real Estate
If you have the potential to convince people and conclude dealings, then nobody can stop you from earning $250,000 annually. In the beginning, you might face failures and low amounts, but once you successfully establish your position in the real estate industry, you will soon enjoy six-figure earnings.
How do you do it? Start with a good business plan, conduct thorough research, develop a database, and make your business book.
Be an Investor in Real Estate
Investment in real estate brings you prolonged ownership which ensures friendship. You can be the owner of a five-unit apartment building through enough savings for a consistent down payment.
Once you own the property, you can rent it out for more money for any down payment for a new building. In this way, money pile up, and ultimately, you would be a millionaire.
Buy the Property and Hold It
It is considered a traditional way to earn a high profit from your investment in real estate. How can you accomplish it? Start investing in residential property, such as a single-family house, or if you have enough money, buy a multi-apartment building, and rent that out.
It would bring an ample amount to your savings account. You can invest this money in buying another property. Hence, start from a small one and then gradually reach the top.
Buy Auctioned Properties
Sometimes auctioned properties results great benefit, the seller auctions them on demand of cash on hand because these properties are soon to be foreclosed; thus highest bidder gets them. If nobody takes part in the bidding, they return to the bank and appear as REOs. If you get one, do some renovations and lease them out for some time before selling them at a profitable price.
Frequently Asked Questions
How do you earn money with commercial real estate?
There are two main ways to profit from real estate investment:
- Rental income from a tenant
- Capital gain as a consequence of rising in the price of the property
What form of commercial property is the most profitable?
Mobile home parks, self-storage facilities, billboards, and RV parks are the highest-yielding types of commercial real estate. These investments all trade at a cap rate of 10% or higher.
Which commercial property type poses the greatest risk?
Single-tenant, single-use buildings, such as auto dealerships, is the riskiest commercial real estate investment.
Who owns the most commercial real estate?
CBRE owns. CBRE Group, Inc., headquartered in Los Angeles and a Fortune 500 and S&P; P 500 commercial real estate company, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue).
Do you have to pay taxes on commercial property?
Rental income from commercial property is taxed. Revenue expenses, such as interest and letting agent fees, are deductible. The applicable tax rates are determined by whether the lessor is an individual, trust, or corporation.
Is it worthwhile to invest in commercial real estate?
Any type of property, whether commercial or residential, is an excellent investment. Commercial properties typically provide more financial reward for your money than residential properties such as rental homes or solitary homes, but there are also more risks.
What is the typical return on commercial real estate?
Commercial property returns are substantially greater than residential property yields. Commercial property yields can range between 5% and 10%. In the meantime, residential real estate is known for profits ranging from 1% to 3%. The lease agreement explains the main reason for the difference.
Do billionaires make real estate investments?
It is no surprise that nearly 90% of ultra-high net worth individuals obtained and maintained their wealth through real estate investment. To be sure, some high-net-worth individuals have a greater investment in real estate than others.
What does a commercial real estate investor do?
Commercial real estate agents are industry leaders who guide customers through the complicated process of purchasing, selling, or leasing a commercial real estate, from discovering office space to focusing on the transaction’s finer details.
There are many ways to make money in real estate; it is a flourishing industry, and real estate is always in demand.