Becoming a successful real estate investor depends on many factors, like your available capital and opportunities that match your lifestyle, personal passion, and business savvy. Every investor knows the holy grail of investing is securing the highest rate of return.

 

Commercial real estate offers incredible potential for maximizing your ROI and can be more secure and lucrative than single-family rental properties. With a varied lineup of properties on the market, and so many different types of investments out there, where does a new investor begin? You’ll want to consider these three key elements when identifying the most profitable commercial property to invest in.

While single-family homes have been an attractive option for beginning investors, and considering the stunning Menlo Park real estate and the gorgeous homes for sale in Palo Alto, residential property acquisition is appealing, but commercial real estate offers a far greater potential for passive income than any single-family residence. It’s a numbers game — more paying tenants will yield more monthly income. Whether a passion for fashion leads you to a luxury retail complex, like the Stanford Shopping Center, or an adventurous spirit finds you seeking out a Menlo Park mixed-use real estate property or a more low-key money-maker, make sure you explore properties catering to a high number of tenants. This way, if one tenant moves out, you’ll still have plenty of others to keep the income flowing. Some options include the following.

Look for structures with eight or more apartments to maximize your return on investment (ROI), and be prepared to hire a maintenance company if hands-on repairs aren’t your thing. With home prices steadily increasing, renting is an ideal scenario for many families and young professionals, making multifamily buildings a low-risk investment.

Self-storage facilities, which perform well regardless of the economic climate, are an outstanding choice, especially for those new to commercial investing. This easy business requires virtually zero maintenance — no repainting after each tenant, no toilets to deal with. Just sweep after each customer moves out, and you’re ready for the next one.

The benefit of mobile home parks is that tenants generally own their home structures and rent the property space from you, ensuring their motivation to pay on time — and taking the home maintenance off your shoulders.

Millennials, known to embrace renting over home buying, have inspired a new way of living, working, and investing — micro-apartments. The apartments are designed in live-work-play setups with an impressive array of walkable attractions and restaurants nearby. They offer luxurious accommodations and a convenient lifestyle, not to mention a hot investment opportunity. Small but chic quarters mean interest is high, as is the number of potential tenants. In the same vein, co-working, or flex, spaces offer entrepreneurs a place to work outside of their apartments and offer investors an opportunity to maximize rental space.

Commercial real estate can provide a more steady income than other investments because commercial properties generally require long-term leases. This makes these properties less susceptible to short-term fluctuations in the market. Which industry is always in need of rental space? Retail. Open-air luxury complexes have replaced the shopping mall as the nation’s favorite way to spend free time. An amalgam of boutiques, bistros, local businesses, and movie theaters, shopping centers exemplify the coveted high-traffic investment area.

 

Choose a development or complex right in the center of things, and you’ll have an all but guaranteed gold mine on your hands. Check out the myriad of things to do in Palo Alto, and you’ll see how in demand this kind of high-traffic location can be. Make sure to research the competition and check out the city ordinates for development guidelines and approval timelines so you’re not held up getting permits or development permission. While large metropolitan areas, like Los Angeles or New York, may seem like obvious choices for commercial investments, you’ll do better to find properties in on-the-rise areas. Hot spots like these Bay Area neighborhoods offer the kind of consistent growth investors can get excited about.

Imagine renting out that single-family home down the street — you have lawn care to think about, property maintenance, being on-call for repairs, shelling out hard-earned money to a property management company, insurance, and property taxes to pay. Is your head reeling yet? Single-family rentals involve a lot of moving parts and a lot of potential risks — but commercial real estate with triple net leases takes away almost all of the headaches, leaving a steady, long-term income and a lightened load of responsibility.

 

Triple net leases, or NNNs, are lease agreements wherein the tenant agrees to pay all property expenses, including building insurance, real estate taxes, and maintenance costs, all in addition to utilities and rent. Why? Because triple lease rent is often lower than alternative commercial spaces. So how do you benefit? Triple net leases offer lower risk and lower responsibility. The tenant assumes the ongoing expenses that typically fall to the landlord, and these leases often span 10 or more years, offering the investor a low-risk, long-term income. Triple net leases often cover industrial parks, shopping centers, retail complexes, restaurant chains, or office buildings.

So which commercial investment property is most profitable? That depends on your own situation, location, lifestyle, goals, and interests. Do you love working with your hands and managing tenants? A large, multifamily apartment complex might be just right. If you’d rather not deal with plumbing repairs and late-night phone calls, a self-storage facility could be the right match. The important thing to consider is which option works best for your knowledge base, available capital, lifestyle, and interests.

 

Just remember to look for properties in your area that offer many tenants, high-growth or high-traffic areas, or triple-net leases. If you’re still unsure which is right for you, contact an investment property expert like Marc Hayden Bryman, a real estate agent for both residential and commercial property. He is happy to guide you through the exciting landscape of Menlo Park, Palo Alto, Atherton, and Redwood City commercial real estate.