Commercial real estate (CRE) is mainly used for leasing a space to conduct business to an individual tenant or corporation. Commercial real estate is different from residential real estate in that residential real estate focuses on spaces meant for living while commercial real estate specializes in the commerce category.
What is commercial real estate?
Commercial real estate is categorized into four separate classes, all within the commerce sphere. Commercial real estate is infrastructure intended for businesses ranging from a small pharmacy to a mall or hotel.
The four classes of commercial real estate are:
From there buildings are further categorized based on appeal and worth. Depending on age, structure, location and a few other factors buildings are labeled class A, B, or C (class A being the highest ranking and class C being the lowest).
The other half of commercial real estate is the investment option. If you do not own a business or are not in charge of finding a corporation’s workplace, you can still get involved in the commercial real estate market. The commercial real estate market is primarily comprised of leasing tenants and investors or building owners. Typically a business will sign a lease with the building owner to operate in that property for a predetermined number of years for a fixed annual or monthly quote. The business has a space to operate in and the investor collects ‘rent’ on the property.
One interesting difference to note between residential and commercial real estate is commercial lease rates are usually determined by square footage whereas residential lease agreements are determined by average rent rates. Additionally, commercial leases longer-term contracts than residential leases. Residential real estate leases rarely exceed 18 months, whereas commercial real estate leases can range anywhere from one to upwards of 10 years.
How do I invest in CRE?
Commercial real estate is not terribly difficult to get involved with and can prove to be a rewarding investment. You can invest in the commercial real estate market in two ways: indirect or direct investment. An indirect investor is someone who doesn’t invest in a particular property but rather purchases CRE market securities.
A direct investor is someone who has the capital to physically purchase a building and become the sole landlord of the property. Direct investors can also be a business or corporation if they choose to purchase their workspace instead of leasing it. Since this requires quite a bit of cash and the price of Denver real estate is skyrocketing, it is not uncommon for a person or business to acquire a loan. Commercial real estate loans, especially in Denver, allow any commercial party to apply for a loan so they can invest in commercial real estate specifically.
Commercial real estate loans are great for businesses that want to capitalize on a real estate opportunity but don’t necessarily have the funds up front. Bold Funding Group offers free applications for commercial real estate loans in Denver with 50 to 55 percent LTV (loan-to-value) commercial mortgages.