Understanding the Landscape: A Guide to Types of Commercial Real Estate Investing

Understanding the Landscape

When shifting their gaze toward real estate, most potential investors think of single family homes. But there are easier and more lucrative options, if you start thinking outside the box.

Commercial real estate investing is the term applied to investing any kind of property that isn’t residential. It could be any type of property ranging from a multifamily development to a medical office to an RV resort. These are properties owned and operated for the sole purpose of cash flow and appreciation. 

This sector offers significant and broad opportunities for investors seeking to expand their portfolios and generate significant returns. However, purchasing multi-million dollar properties isn’t available to most investors, which is why private investors are increasingly placing their trust in sponsors like Redwood Capital Advisors.

In this guide, we’ll dive into the various types of commercial real estate investments, offering insights and expertise to help you make informed decisions. 

Whether you’re a seasoned investor or just starting out, this guide is tailored to provide you with a clear understanding of the diverse landscape of commercial real estate.

What is Commercial Real Estate Investing?

Commercial real estate (CRE) refers to properties used primarily for business purposes. These include office buildings, retail spaces, warehouses, and more. Investing in CRE involves purchasing these properties to generate income through leasing space or capital appreciation.

The Different Types of Commercial Real Estate Investments

TypeScopeInvestment Strategy
Office BuildingsOffice buildings can range from small professional buildings to skyscrapers in major cities.They are typically leased to companies and businesses. The stability of income depends on the business climate and the strength of the tenants.
Retail PropertiesShopping centers, strip malls, and traditional malls.Retail properties rely heavily on consumer spending and location. Investors should consider foot traffic, tenant mix, and economic trends.
Industrial Real EstateWarehouses, distribution centers, and manufacturing facilities.Industrial properties are often long-term leases and can be less sensitive to economic downturns compared to retail spaces.
Multifamily UnitsApartment complexes and multi-unit residential buildings.Multifamily units provide consistent rental income and can be a hedge against inflation.
Hospitality Real EstateHotels, motels, rv parks, and resorts.This type of investment can be more volatile as it’s heavily influenced by tourism and economic conditions.
Specialty PropertiesMarinas, storage units, and medical facilities.These properties often serve a niche market and can offer unique investment opportunities.

Evaluating the Risks and Returns

Investing in commercial real estate comes with its set of risks and rewards. 

Factors such as location, economic conditions, and tenant creditworthiness play a crucial role in determining the success of your investment. It’s essential to conduct thorough market research and consult with real estate experts to make sure you’re securing a profitable investment.

It’s also important to remember that the commercial real estate market is influenced by broader economic trends. Understanding these cycles and market dynamics is crucial for timing your investments and maximizing returns.

Seek Overlooked Opportunities 

Commercial real estate investing offers a world of opportunities for those willing to do the research, due diligence, and asset management. Investing in these assets needs to be approached like a business. How can you find opportunity and where is the potential for adding value to increase returns. With the right knowledge, strategy, and mindset, you can unlock the potential of commercial real estate to enhance your investment portfolio.

At Redwood Capital Advisors, we pride ourselves at being masters at finding special situation investments. That means we don’t limit our portfolio to any one asset class but instead seek out overlooked unique opportunities that deliver outperforming returns. We don’t fall into the trap of investing in the most popular class. 

Remember, the key to successful investing in this field lies in thorough research, understanding market trends, and working with the right partners.

Are you interested in learning more about Redwood Capital’s upcoming investments? We invite you to book a call with our General Partner, Ben Spiegel. If nothing less, you’ll enjoy a zero-obligation insightful and engaging one-on-one conversation with a true real estate enthusiast. 

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