Real estate is one of those things that always comes up when the topic of making money or investing is raised. Lots of successful businessmen and women cite real estate as a crucial factor to their success. By how exactly does one make money from real estate?
Whether you intend on diving into real estate or you’re curious about the whole process, it’s worth learning how one makes money in the real estate industry.
Simply put, money is made through value addition, value creation, and value appreciation. The most common way people make money in real estate is through value appreciation. These three forms are the pillars of wealth generation in the real estate industry and are employed in diverse ways.
Now, what does it all mean? Keep reading to find out 10 ways you can make money from commercial real estate. This article will go in-depth about real estate, the specifics of commercial real estate, and the different ways you can earn money in the commercial real estate industry. TLDR? Click here.
TABLE OF CONTENT
What is Real Estate
What is Commercial Real Estate
Benefits of Commercial Real Estate
8 ways you can make money from commercial Real Estate
WHAT IS REAL ESTATE?
Real Estate refers to property. It includes land, buildings, roads, structures, utility systems, etc. The real estate industry is concerned with property and effects people can own. It may be land containing natural resources, an apartment complex, a skyscraper, a shop, or anything in between. The professionals, service members, contractors, owners, etc. that work in this space are all part of the real estate industry in general.
Real estate is often broken up into four broad categories
- Residential Real Estate
This includes properties and structures specifically designed for residential use. Apartment complexes, single-family spaces for rent, suburban areas, etc., fall into this category.
- Commercial Real Estate
This category includes land, buildings, and properties used by businesses to carry out operations. Examples are shopping malls, office complexes, hotels, and parking lots.
- Industrial Real Estate.
The industrial estate includes property and land used for industrial plants, factories, warehousing, etc.
- Land Real Estate
Now, this is often described as the most rudimentary form of real estate. It focuses on acquiring undeveloped property. The property can be developed by its owners or kept as an investment.
WHAT IS COMMERCIAL REAL ESTATE?
As stated earlier, commercial real estate is focused on structures, land, and property aimed at businesses. Commercial property is usually larger, having businesses as its tenants. Its property is usually used for the daily operations of a business. Businesses usually prefer to rent these spaces to reduce capital spending and operational costs. Businesses will often lease some of their space to their own tenants. The key thing to note is that property here is used to produce goods and services and is not just used for residential purposes.
WHY COMMERCIAL REAL ESTATE?
Commercial Real Estate offers a ton of benefits
- Routine Steady Income
Investing in commercial real estate options afford you the benefit of additional cash flow opportunities through rental income. This income is stable and can offset other costs or future purchases you wish to undertake.
- Wide Range of Property
There is a large variety in the type of property you choose to invest in. You can purchase old properties for renovation and conversion into modern office spaces; you could purchase and develop a property for retail use or sub-lease a hostel or Air BnB.
- Direct and Indirect Investment opportunities
Investors have the option to invest directly or indirectly in the commercial industry. Investors can invest through Real Estate Trusts (RETs) and exchange-traded funds (ETFs) that invest in commercial property-related stocks. Or they can invest in companies that cater to the commercial real estate market, such as banks and realtors. Investors can also invest directly by becoming landlords.
- High Returns on Investment
The most attractive feature about real estate investment is the opportunity for high returns on investment. For example, a high-demand region in Lagos, Nigeria, is Abule Oja. This area is viable due to its high student density and proximity to commercial districts in Lagos State. Over the last five years, rent prices have soared by an average of 20 percent each year as more people flock to the region. This is one of the numerous possible examples of the power of investment in commercial real estate.
- Portfolio Diversification
Asides from being a fantastic investment option with high returns, commercial real estate can serve as a means of asset diversification for an investor. Investment options like Fundrise, Catalyst Business Consult (CBC), etc., have made it easier than ever for portfolio diversification.
8 THINGS YOU CAN DO TO EARN MONEY IN COMMERCIAL REAL ESTATE
1. PROPERTY RENOVATION AND DEVELOPMENT
A savvy investor can identify areas with promise—areas with a rising population and economic potential. You can purchase a property there, renovate it and convert it to upscale living quarters and apartments. Developed properties in such areas command higher rental fees and are always in high demand. Everyone wants better living conditions, and folks will pay top dollar if you can provide that.
2. LAND ACQUISITION
If you are aware of relatively undeveloped areas that are likely to become commercially viable in a few years, a strategy you can employ is to purchase land and property at low prices. This affords you a headstart in that location. You can take advantage of the opportunity by building shops and other facilities that will become relevant as the area develops. Or you can hold the land and watch its value accrue as the years pass.
3. SUBLEASING
Another way one can earn is by taking on long-term leasing plans for properties in competitive commercial regions. The investor can then sublease parts or sections of the property to other entities. Depending on the nature of the property, you can construct residential units, hostels, and so on.
4. B2B ASSET LEASING
You can directly purchase property to lease to other businesses. You can lease land for use as hotels, warehouses, office complexes, and much more.
5. ASSET FLIPPING
Areas with run-down buildings are prime targets for re-development programs. Investors can buy properties in these areas, converting them to modern urban regions. Scaling down, individuals can purchase run-down houses, apartments, shops, etc., fix them up to resell for a profit. This practice is common in high demand for housing, such as Yaba, Lagos, or Detroit, Michigan.
6. REAL ESTATE TRUSTS
A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. Modeled after mutual funds, REITs pool the capital of numerous investors. This makes it possible for individual investors to earn dividends from real estate investments without buying, managing, or financing any properties themselves.
7. AIR BnB
The practice of renting out spaces through third-party applications like Air BnB has gained massive popularity in recent times. The types of leases are usually extremely short. Anywhere from a few days to a few weeks on average. Typically, areas that have a high influx of human traffic employ these apps to gain temporary tenants. Areas surrounding beaches, resorts, vacations, and other tourist locations often offer Airbnb lodgings.
8. REAL ESTATE INVESTMENT GROUPS (REIGs)
This is another alternative for investors who do not wish to deal with the actual running of their property. REIGs are like mutual funds. Typically, a company buys apartments, does development, and allows investors to buy units, thereby allowing the investor to join the company. A single investor may own multiple units or apartments. However, the company operating the group collectively manages all units. The company handles maintenance, advertising, rental collection, and tenant installations and ejections. It’s a rather convenient option. Project Balogun 3.0 (PB3) is an example of a modified version of this system.
To get your start in real estate investments, Contact Catalyst Business Consult Today on
+234 816 272 6997 or click here.
