Commercial real estate investing offers a promising avenue for building wealth and generating a steady income stream. Most of us know this since financial teachers (and common sense) prove it to us on a daily basis. However, one of the primary concerns for potential investors is the capital required to get started. So, how can you get into commercial real estate investing with limited capital?
Some of the best ways to get into real estate investing with limited capital requirements include crowdfunding opportunities, REITs, joint ventures, commercial real estate loans, and real estate syndication. Building up savings and growing them with interest is a good solution but more long-term.
Not all of us start on an equal financial footing. Some have savings built up over many years, while others can barely make ends meet. However, commercial real estate investing is one of the best ways to build or increase wealth. Thankfully, you don’t have to inherit millions of dollars to make it work. Let’s dive into the best ways for anyone to get into commercial real estate investing.
How to Get Into Commercial Real Estate Investing with Limited Capital
It’s possible to grow your wealth through commercial real estate with only a few dollars. Let’s go through the six best, proven ways to do so.
Start Small with Crowdfunding
Most of us have mixed views of crowdfunding campaigns, and it’s a fact that there are many scams on these platforms. But there are also some legitimate opportunities to make good money, even in commercial real estate, since some crowdfunding platforms focus on real estate investment opportunities.
Two examples are RealtyMogul and Fundrise. Fundrise, in particular, claims to allow people to start investing in real estate from as little as $10. Still, both platforms make it easy to grow your commercial real estate investment portfolio considerably if you can invest $500 or more.
Of course, as with any investment opportunity, you have to be careful. Examine and evaluate each opportunity before you invest. Some scams are highly elaborate and may appear legit in almost every way, and it’s also possible for an opportunity to be a bad investment. Do your due diligence since any successful investor will tell you that investing $1 is as essential as $1,000.
Consider Starting with Real Estate Investment Trusts (REITs)
President Dwight Eisenhower signed Real Estate Investment Trusts into legislation in 1960. The purpose was to give even low-income individuals the opportunity to invest in real estate and earn a considerable income from their investments. Since then, the model of REITs has spread around the world and become increasingly popular.
Real Estate Investment Trusts provide a cost-effective way to invest in commercial real estate even if you don’t have the substantial upfront investment required for property acquisition. By purchasing shares in a REIT, you gain exposure to a diverse portfolio of commercial properties, such as office buildings, malls, and apartment complexes, while also receiving regular dividends.
REITs let you earn dividends to supplement your regular income, but there’s also investment growth in the form of capital appreciation.
Most REITs require an investment of at least $1,000 to $2,500, so they aren’t quite as easy to get into as crowdfunding opportunities. But if you have some money saved up, REITs are an excellent way to start building your wealth through commercial real estate investments.
If you want to find out more about legitimate REIT opportunities, Nareit is the best place to start.
Explore Joint Ventures and Partnerships
This is not necessarily the easiest way to get started, but it is an excellent opportunity if you can manage it. Partnering with someone else who’s also interested in commercial real estate investment or someone who’s already investing offers a few benefits.
First, you will only have to raise some of the required capital yourself. If you have some savings available, you can add that money to someone else’s investment capital. This way, you can share the risk but also the rewards.
It’s also a great way to learn from an experienced investor. If you can partner with someone who has invested in commercial real estate before, they can teach you what to look out for in sound investments and how to navigate the murky waters of inadequate opportunities.
This is a more challenging approach. Not only do you need to save up a considerable amount of money, but you also have to find someone to partner with and convince them to let you partner with them. But it’s not impossible, and the opportunity to learn more about investing makes it one of the best opportunities when you’re new to investing in commercial real estate.
Leverage Commercial Real Estate Loans
A more traditional approach to investing in commercial real estate is using bank loans. It’s a method propagated by many real estate investors, including Robert Kiyosaki. If you see an opportunity where a piece of commercial real estate will generate an income greater than the repayments on the mortgage or loan, this will likely be a good investment option.
It probably won’t be easy. Banks require a considerable down payment, so you must have access to some savings. They also want to see that you performed your due diligence on the investment opportunity with realistic expectations, so you must compile a detailed business plan.
However, the due diligence and detailed business plan should ideally be a part of any investment you make, and the potential rewards are great since you don’t have to share your profits with anyone else. So, if you have the option, securing a mortgage or bank loan might be worthwhile.
Explore Real Estate Syndication
Syndication takes the concept of partnerships one step further. It allows you to pool your money with a group of other investors to invest in real estate. This way, you can start investing in commercial real estate with a relatively small amount of money, and the risks are also shared between all the investors.
However, you should also keep in mind that all profits will be shared in accordance with the percentage of the capital you invested. This means your income may not increase as quickly as you would prefer. But it is still an excellent way to get started if you don’t have any other options, and it’s a more hands-on method than some of the other investment opportunities.
You can learn more about local syndication opportunities by attending business networking events in your area.
The Long-Term Solution: Save and Invest Over Time
This is the obvious answer, but it’s not a quick one. However, if you are in a position where you can put some money away over a long period of time (from a job, business, or other investments), it’s the most practical and hands-on way to invest in commercial real estate.
Not everyone can do this. But it’s also worth looking into the other options on this list to increase your income, which you can save for future investments.
Conclusion
The capital requirements for getting into commercial real estate investing may seem daunting, but there are various approaches to accommodate your financial situation. Whether you’re starting with a small budget or have substantial resources, these six strategies can help you make your mark in the world of commercial real estate.
As you embark on your commercial real estate investment journey, remember to conduct thorough research, seek professional guidance, and have a clear investment strategy to maximize your chances of success. By exploring these options, you can take your first steps toward achieving your real estate investment goals.