“Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you off the map.” – Wayne Calloway
One of the most frequently asked questions I get is, “What kind of commercial real estate is the best to invest in?” or “What type of commercial real estate should I invest in?”
This is one of the most basic questions when looking at commercial real estate as an investment vehicle because there are so many different types. Many investors struggle with the question of whether to invest in apartments, a shopping center, an office building, bare land, or apartments, etc.
Here is the good news…there is NO wrong answer. So how do you decide for your own particular situation?
You make your choice based on what is most important to you in terms of wealth building. For example….
Are you mainly interested in cash flow? Would you like a predictable income stream coming into your bank account month after month? Would this be something you would depend on as income or not? Do you need to have cash flow?
What about equity? Would you sacrifice monthly cash flow for equity jumps in property value? Can you go a period of time without cash flow and wait for months to get the nice pay-off from the property?
Maybe a Combination of Both?
This is something to work on, at a personal level – and it takes time and focus. Many people know that they want to be an owner of investment real estate, know the benefits, and have decided to move forward, but do not get past this very important decision.
Make sure you put this exercise on your to do list before you invest this year.
Now, in terms of cash flow, let's rank the most predictable cash flow properties first:
- Single Tenant Commercial
- Multi-Tenant Commercial
- Apartment Properties
But there is a catch. The more predictable the cash flow is usually the less of a return you will get. Always keep this in mind.
Another way of looking at this is based on this order is usually (Generally) the way it goes as far as worst return to best return. Not always but close.
Again, there is no wrong answer in which is best – it really depends on your investment goals and your personal situation. It takes some time and thought, but truly defining what is most important to you before you get started will be key to your success in commercial real estate.