Many California residents may want to invest in commercial real estate but believe they do not have the means to do so. There are ways in which people can invest in the real estate market without actually having to purchase the property itself.
Down payments for commercial real estate are typically much higher than those required for residential real estate purchases, and may be as much as 30 percent of the value. Instead of making such direct purchases, one option for investors is to buy shares in real estate investment trusts. REITs, many of which are publicly traded, are typically funds that are comprised of a pool of income-producing properties. A share in a REIT may thus provide a steady income stream for investors.
Indirect ownership through the purchase of commercial mortgage-backed securities is another way in which people can invest in commercial real estate. These are bonds that pay interest and that hold bundles of commercial mortgages, and are expected to rise in issuance volume to $150 billion by 2017. Direct ownership, by contrast, means that the person who purchases the commercial real estate will have to deal with management issues and other similar problems that more passive investment strategies do not have.
Investing in commercial real estate, either directly or through REITs and CMBS, can be quite lucrative. Potential investors should conduct careful research about the properties in which they are interested. Attorneys who have experience with these matters may provide help to their clients in conducting the needed market research. In this way, they may help their clients make more informed choices about the type of commercial real estate investments that may work best for them. Legal counsel may also assist clients in a periodic review of their overall portfolios to make certain they are appropriately diversified.
