Commercial Real Estate Investing
Begin Your Real Estate Investment Journey.
The best place to start your real estate investing journey is with a community that understands the industry and can help you navigate it well. At Auor Capital, we’re one of the few commercial real estate investment funds that provides investment opportunities for non-accredited investors. It allows us to put legitimate commercial real estate opportunities in front of a whole new community of investors. By working together, we’re able to bring the right properties to the table. At the same time, we also provide the expertise, training, and frameworks needed to navigate the many complexities of the industry.
The Foundations Of Commercial Real Estate Investing.
Learn the language. Learn the details. Learn the business. Commercial real estate investing is more accessible than many people realize, but it takes the right knowledge, the right opportunities, and the right team. It starts with understanding the fundamentals of real estate investing. By equipping yourself with the right information and aligning yourself with the people and opportunities, seemingly complex commercial real estate investments are brought within reach.
The Benefits of Investing in Commercial Real Estate.
Increased Potential
for Income
The best reason to invest in commercial real estate over residential property is the earning potential. They typically have an annual return of 6-12%.
Regular, Passive Income
The Opportunity to Diversify Income Streams
Long-Term Wealth Potential
Business
Relationships
Business positioning produces increased access and visibility to the surrounding community.
Community-focused business operations
Networking and further investment potential
Expanded tenant and business partner capacity
Diversification of Investments
The more diverse your investments, the more you’re able to distribute risk and capitalize on promising opportunities.
Access to alternative revenue streams
Increased diversity = distributed risk
Increased
Cash Flow
Many investments don’t offer the same potential for recurring revenue that comes with commercial properties.
Monthly tenants offer more opportunities for recurring revenue
6%-12% annual returns on average
Limited Operational Hours
Commercial real estate has less operational demand because of limited office & operational hours.
Shorter windows of operational demand
Less facility usage and aesthetic/cosmetic wear
Extended performance of functional elements of the facility
Longer Leases Mean Less Turnover
The operational costs associated with relocating lead most businesses to seek long-term lease options.
Predictable revenue
Lease & revenue consistency
Lower facility demands because of less construction, remodeling, and operational adaptations
Getting Started in Commercial Real Estate Investing.
Opportunities to invest in commercial real estate were once uncommon, reserved for a unique and even seasoned, elite investor. The complexities of finding the right property, calculating the profit potential, and navigating the nuances of the sale created a barrier for many people. With the development of real estate funds like Auor Capital, even inexperienced or intimidated investors find opportunities to make commercial real estate a legitimate part of their investment portfolio. The opportunities are available. The roadblocks are not what they may seem. You just need the right team of people.
5 Ways to Invest in Real Estate
Investing in Office Space
Office space ownership has the advantage of long-term rentals and predictable leasing. Because of limited hours of operation, you also have the advantage of reduced impact on your property.
Retail Space
One of the highest priorities in commercial real estate investing is location. Retail space that exists in high-traffic areas can increase in value significantly. This gives the investor a significant advantage for long-term profitability.
Industrial Space Investments
Because industrial spaces are often a heavy investment from companies based on operational machinery and workflow build-out, industrial space investments can offer longevity with tenants.
Multifamily Housing Investment Opportunities
Many investors who can move into the multifamily housing space at the right time or with the right properties can make significant moves forward.
Special Purpose
Special purpose property, by definition, is property that is designated for a limited or restricted use. The right special purpose property investment can put you in the driver’s seat in the supply & demand game.
How to Find the Right Commercial Investment Property.
Success in commercial real estate comes down to the right properties at the right time, and finding the right investment properties and making them happen comes down to hard work. An investor needs to be able to find potential properties, determine their viability, assess their value and capacity for return, and engage with property owners to determine what properties are available. It can be cumbersome and intense for even the most well-seasoned investor. What you learn quickly is that the start-to-finish process of commercial real estate investing is best done alongside a good team.
5 Ways To Find and Assess Real Estate Opportunities
Determining Value
There are common property valuation methods used by experienced real estate investors to determine the viability of a real estate purchase. These approaches will give you the frameworks for determining a reasonable price for the acquisition of a commercial investment property and vary based on the type of property being considered. Research valuation processes like the Sales Comparison Approach, the Gross Rent Multiplier, the Income Approach, and the Cost Approach. These valuation processes all serve a unique function and should be considered independently depending on the property being assessed.
Networking
By continually engaging in conversations with business owners, other real estate owners, and investors, you can leverage relationships to capitalize on commercial real estate opportunities as they become available. After any reasonable amount of time in the market, you’ll discover that many investments were made possible through relationships established beforehand.
Use A Broker/Agent
The advantage of using a brokerage or an agent for finding and acquiring investment property is the advocacy you have in having someone working on your behalf. Make sure the broker or agent you choose is experienced in finding, valuing, and facilitating investment property acquisitions since they are unique and require a different level of management from traditional real estate transactions.
Join A Syndicate
One reasonable and useful method for finding and acquiring investment property is through joining a syndicate. A syndicate is a temporary agreement between professionals for major purchases. It allows for the pooling of resources, the sharing of functional and logistical responsibilities of the transaction, and the disbursement of risk. Real estate investors leverage a syndicate when the investment property they’re interested in is outside of their budget or capacity to manage.
Search the MLS
The MLS can give you access to commercial investment property listings as they become available. You should automate the listings whenever possible, however, so that you regularly have access to the types of properties you’re looking for. This process for property search is most useful in conjunction with other search methods, as working solely with MLS listings can limit your ability to competitively vie for an investment property.
Finding Opportunities with Real Estate Investing.
Finding the right investment property is everything. The most accomplished real estate investors found success by finding the right investment opportunities. Whether it was discovered by a broker, by a colleague, or by happenstance, successful real estate investing always comes down to finding the right real estate deal at the right time. On your real estate investing journey, you will be able to make the right decisions about investments when you can find the right investment properties. And that takes a team.
5 Pathways to Finding the Right Real Estate Investment
Determining Value
There are common property valuation methods used by experienced real estate investors to determine the viability of a real estate purchase. These approaches will give you the frameworks for determining a reasonable price for the acquisition of a commercial investment property and will vary based on the type of property being considered. Research valuation processes like the Sales Comparison Approach, the Gross Rent Multiplier, the Income Approach, and the Cost Approach all serve a unique function and can be considered depending on the property being assessed.
Networking
By continually engaging in conversations with business owners, other real estate owners, and investors, you can leverage relationships to capitalize on commercial real estate opportunities as they become available. After any reasonable amount of time in the market, you’ll discover that many investments were made possible through relationships established beforehand.
Use A Broker/Agent
The advantage of using a brokerage or an agent for finding and acquiring investment property is the advocacy you have in having someone work on your behalf. Make sure the broker or agent you choose is experienced in finding, valuing, and facilitating investment property acquisitions. These property sales are unique and require a different level of management from traditional real estate transactions.
Join a Syndicate
One reasonable and useful method for finding and acquiring investment property is through joining a syndicate. A syndicate is a temporary agreement between professionals for major purchases. It allows for the pooling of resources, the sharing of functional and logistical responsibilities of a transaction, and the disbursement of risk. Real estate investors leverage a syndicate when the investment property they’re interested in is outside of their budget or capacity to manage.
Search the MLS
The MLS can give you access to commercial investment property listings as they become available. However, you should automate the listings whenever possible so that you regularly have access to the types of properties you’re looking for. This process for property search is most useful in conjunction with other search methods, as working solely with MLS listings can limit your ability to competitively vie for an investment property, especially when you’re competing against seasoned investors for a property.
Determining the Value of Commercial Investment Property.
The process of finding, valuing, and purchasing the right commercial real estate property ultimately comes down to hard work. Unlike the process of home buying or even bare land purchases, commercial real estate decisions are not based on how someone feels about a property. The decision to purchase comes down to research, data, and analysis. It’s a numbers game; a comprehensive process of assessing the value and determining its availability for purchase and functional use for business.
The Numbers that Seasoned Investors Know
Commercial real estate investing is a numbers game, and that means that investors have the responsibility to assess the value of their investments. There are multiple ways to arrive at these figures.
Gross Rent Multiplier
The Gross Rent Multiplier measures the sale price of a property against that property’s potential for rental income. Generally speaking, the higher the GRM, the more overpriced the property. Usually, investors want the GRM to fall between 4 and 7%.
Income Capitalization
This valuation process finds the value of a property based on its potential for income an investor can expect to earn from the property based on similar properties with the same (or at least similar) functional or business purposes and based on the ability to predict decreased costs of maintenance on the property.
Cost Per Rentable Square Foot
The Rentable Square Foot valuation method for commercial real estate combines the usable square footage of space with the common, shared areas of a property (such as stairwells, lobby areas, elevators, restrooms, etc.). This allows the investor to calculate the cost per rentable square foot, compare that to the cost per square foot of the space, and determine the building’s value.
Value Per Door
Used primarily for residential real estate spaces with multiple residences on site (like apartment buildings) or commercial property with multiple business spaces, the Value-per-Door calculation divides the cost for the property by the number of units available for rent. This helps investors weigh the value of the property against the potential for income earned.
Sales Comparison Method
This approach to real estate investment property valuation assesses current (and recent) sales data on comparable properties to determine the fair market value for a potential investment property. The challenge with this method often comes with finding similar properties.