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How Commercial Real Estate Investing Works

Alternative investments, such as real estate, help to diversify your portfolio while offering a potentially lucrative return.
Alex Hamilton is a regular contributor to numerous news sites.
Alex Hamilton is a regular contributor to numerous news sites.

Alternative investments, such as real estate, help to diversify your portfolio while offering a potentially lucrative return. Residential real estate can offer great returns, too, but with commercial property, you have the potential to generate more income.

If you’re considering investing in commercial real estate, you should understand the benefits and how this investment vehicle works.

The Benefits of Commercial Real Estate Investing

There are many benefits to investing in commercial real estate, including:

Portfolio Diversification

Real estate investments, in general, are a great way to diversify your portfolio. If the stock market falters, your real estate investments can help minimize your losses.

Diversification is important, as it ensures you don’t have too much exposure in one industry or investment vehicle. As the saying goes, you should never put all of your eggs in one basket.

Higher Income

One of the main benefits of investing in commercial real estate is that it offers higher income than residential real estate.

Investors see an average return of 6-12%. Residential real estate only offers returns of 1-4% on average.

With commercial property, vacancy risks are also lower because properties are spread across several units. Lease contracts are generally longer, which also means that tenants have longer stays.

Less competition and greater cash flow also add to the benefits of commercial real estate investing.

Decide Which Type of Investment is Right for You

There are a few different ways to invest in commercial real estate.


Crowdfunding offers a unique way to invest in real estate, and you don’t necessarily need to make a large investment to get started.

For example, Fundrise, one of the most popular platforms for real estate crowdfunding, only requires a minimum investment of:

  • $500 for a starter portfolio
  • $1,000 for an advanced portfolio

In most cases, you can choose the projects you want to invest in.


Office space is in high demand in just about every city – big and small. In major metropolitan areas, the opportunities are more lucrative. High-rise buildings, for example, house multiple offices, which gives you the opportunity to generate several streams of income.

But even in small towns, a single tenant in an office space could provide you with long-term income.

In most cases, tenants in commercial spaces sign long leases.


Investing in retail space is similar to investing in office space, but location tends to be more important. If you want to invest in a strip mall with several stores, it’s important to ensure that the area receives a lot of traffic. Otherwise, you may wind up with several empty stores.


Storage units are always in high demand, even in small towns. The key to success here is finding a good location and ensuring that there isn’t too much local competition.

Consult with the Right Professionals

When investing in commercial real estate, it’s important to ensure that you consult with the right professionals. You can’t go at it alone. Even when using a crowdfunding platform, there are teams of professionals that find opportunities and manage investments.

Along with a real estate agent, you want to ensure that you have a good real estate lawyer to ensure the deal goes smoothly and on fair terms.

Additionally, you may need someone to manage the property and someone to find investing opportunities on your behalf (in addition to your real estate agent).

Working with the right professionals can mean the difference between a smart and failed investment.