November is National Entrepreneurship Month, a celebration of all the risk-takers and go-getters who push their ideas forward and hedge their bets on themselves. There are so many kinds of entrepreneurs and businesses in which they operate. But today our focus is specific to the commercial real estate entrepreneur. Whether you’re looking to get your start as a CRE entrepreneur or you are an existing one and actively adding more properties to your portfolio, continue reading to see the lucrative advantages of operating a commercial real estate venture. Even better, now’s the perfect time given the current economic environment and its positive effects on the CRE market.
Types of Commercial Real Estate
Investors purchase commercial real estate as a business venture with the intent to earn a profit either through 1. rental income or 2. price appreciation of the property. So, let’s start with the basics: the types of properties that are considered commercial real estate.
Here’s a breakdown of the main types of commercial real estate:
1. Office Buildings
- Class A: High-quality, modern buildings in prime locations with excellent infrastructure.
- Class B: Older buildings with good quality but may require some renovation.
- Class C: Older buildings in less desirable locations with potential for redevelopment.
- Examples include skyscrapers, office parks, and coworking spaces.
2. Retail Spaces
- Standalone Stores: Independent buildings for individual retailers.
- Strip Malls: Open-air complexes with a mix of stores and restaurants.
- Shopping Centers & Malls: Larger complexes with anchor tenants like department stores.
- Power Centers: Collections of big-box retailers like supermarkets or home improvement stores.
- Lifestyle Centers: Upscale shopping complexes that combine retail, dining, and entertainment.
3. Industrial Properties
- Warehouses: Large spaces for storage and distribution of goods.
- Manufacturing Buildings: Facilities for producing and assembling products.
- Flex Spaces: Hybrid properties that combine office and industrial space.
- Cold Storage: Specialized facilities for perishable goods.
4. Multifamily Properties
- Apartment Buildings: Includes high-rise, mid-rise, and garden apartments.
- Duplexes, Triplexes, and Quadplexes: Smaller residential buildings with multiple units.
- Student Housing: Dedicated accommodation for college students.
- Senior Living: Facilities catering to the aging population with specialized services.
5. Hospitality Properties
- Hotels & Motels: Includes luxury hotels, boutique hotels, and budget motels.
- Extended Stay Hotels: Offer amenities for longer stays, such as kitchens and living areas.
- Resorts: Properties in vacation destinations with extensive amenities like spas and golf courses.
6. Special Purpose Properties
- Medical Facilities: Includes hospitals, clinics, and outpatient centers.
- Self-Storage: Units rented out for personal or business storage.
- Religious Buildings: Churches, mosques, and other places of worship.
- Educational Facilities: Schools, colleges, and daycare centers.
- Entertainment Venues: Theaters, sports arenas, and amusement parks.
In most cases, a commercial real estate property is rented out to other businesses, but it can also be leased to individual tenants, such as with multi-family properties. Each asset type comes with its risks and advantages, though the industry as a whole is continuing to show upward potential for savvy CRE entrepreneurs.
Why Commercial Real Estate Is A Good Investment Vehicle
Owning a commercial real estate business helps investors diversify their assets and better weather the storm through market downturns.
The value of commercial properties tends to perform well even when the value of equities and stocks is in decline. Particularly during periods of market volatility, owning commercial real estate is a strategic endeavor for investors and entrepreneurs.
Steady Rental Income
One of the biggest benefits to such entrepreneurs is that CRE delivers supplemental income and even passive revenue streams through tenant lease payments.
The best investments are made when those payments cover the owner’s loan payments and carrying costs, and even turn a monthly profit.
In addition, the property is gaining equity over time through natural market inflation or building renovations and improvements.
Versatility
Above all, owning a commercial real estate venture gives investors the benefit of versatility in how they purchase, manage, and sell their investments.
These entrepreneurs can either make improvements to their properties and flip them for a profit, or they can keep the property and continue to collect rental income for the business.
That’s what makes this type of entrepreneurship so exciting. CRE entrepreneurs have tons of options to leverage and control their money while gaining more wealth from their investments.
There are also tax benefits of owning commercial real estate, all CRE entrepreneurs should know this.
About AVANA CUSO
Established in 1998 and headquartered in Simi Valley, CA, AVANA CUSO is one of the most seasoned credit union service organizations (CUSO) focused on commercial real estate lending. For decades, we have partnered with credit unions across the country to offer competitive and collaborative CRE loans. We also uniquely support and guide our partners through the entire lifecycle of our loans. AVANA CUSO is a proud member of the AVANA Family of Companies.
AVANA Group of Companies and AVANA CUSO are dedicated to empowering CRE entrepreneurs by providing tailored business lending solutions that align with their unique needs and growth aspirations. With over two decades of expertise in commercial real estate lending and private credit, AVANA is committed to helping entrepreneurs seize new opportunities, expand their portfolios, and achieve sustainable growth. Whether it’s navigating complex financing scenarios or securing funds for acquisitions, developments, or expansions, AVANA stands by CRE entrepreneurs at every step, ensuring they have the resources and support needed to succeed. Through our comprehensive range of loan products and personalized approach, we enable businesses to thrive in an ever-evolving market landscape.