Introduction
In recent years, invest in commercial real estate online has become increasingly popular for both individual and institutional investors. Technology has made it easier than ever to research, analyze, and invest in commercial real estate from anywhere with an internet connection. This article provides an overview of online commercial real estate investing, including the benefits and risks, different investment platforms, and tips for getting started.
Benefits of Investing in Commercial Real Estate Online
Invest in commercial real estate online offers many potential benefits compared to traditional methods of commercial real estate investing:
- Accessibility: Online platforms allow anyone to invest in commercial real estate opportunities that were previously only accessible to institutional investors and REITs. Individuals can get started with a relatively small amount of capital.
- Diversification: Investing in commercial real estate can help diversify an investment portfolio beyond just stocks and bonds. Commercial real estate tends to have a low correlation with the broader stock market.
- Passive income potential: Many commercial real estate investments generate steady rental income streams. This provides investors with consistent passive income separate from their other sources.
- Professional management: Online platforms take care of property management, freeing up investors’ time. This includes collecting rent, maintenance, repairs, etc.
- Transparency: Reputable online platforms thoroughly vet each investment opportunity and provide relevant financial documents and data for investors to analyze.
Risks of Investing in Commercial Real Estate Online
While online commercial real estate investing provides many advantages, there are still risks to consider:
- Illiquidity: Commercial real estate investing is illiquid compared to stocks and bonds. Investors’ capital is tied up for years or decades.
- Volatility: The value and income generation of commercial real estate can fluctuate significantly depending on the overall economy.
- Due diligence: It’s critical for investors to conduct proper due diligence despite the ease of online investing. Not all platforms are created equal.
- Valuations: Private real estate valuations may not be precise. Independent appraisals are recommended before major investments.
- Diversification: Most online platforms focus on a particular real estate sector or strategy. Investors should build a diversified portfolio across different platforms.
- Fees: Various management, transaction, and maintenance fees can eat into returns. Investors should factor fees into their expected returns.
Online Commercial Real Estate Investment Platforms
There are several types of online investment platforms for commercial real estate:
Crowdfunding Sites
Real estate crowdfunding platforms pool money from multiple investors to fund commercial properties. Some examples include:
- Fundrise
- Crowdstreet
- RealCrowd
These sites offer investments like retail, office, industrial, and multifamily syndications. Investors can browse and screen different opportunities. Minimums are often low at $1,000-$5,000.
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REITs
Public non-traded and private REITs (real estate investment trusts) are increasingly accessible through online platforms. Some examples include:
- Yieldstreet
- CrowdStreet Marketplace
- RealCrowd Primary
REITs offer exposure to portfolios of properties. Minimums range from $1,000-$25,000. These are passive investments with limited control.
Online Rental Marketplaces
Websites like Roofstock allow investors to browse and purchase individual rental properties like single-family rentals. Investors can select properties based on metrics like projected cash flow.
Tips for Investing in Commercial Real Estate Online
Here are some tips for successfully investing in commercial real estate online:
- Conduct thorough due diligence – Vet the platform, investment sponsors, property operators, and deal terms closely.
- Diversify across sectors and geographies – Don’t concentrate too heavily in one sector or region.
- Factor in fees – Account for platform fees, management fees, promote fees, etc.
- Consider liquidity needs – Online commercial real estate investing is illiquid. Don’t invest money you may need quickly.
- Evaluate risk-adjusted returns – Weigh the returns versus relative risk for each opportunity.
- Invest consistently over time – Dollar cost average into deals rather than trying to time the market.
- Reinvest proceeds – Consider reinvesting any income distributions into new deals for compounding.
- Work with a tax advisor – Understand the tax implications of online commercial real estate investments.
Conclusion
Invest in commercial real estate online enables individual investors to access institutional-quality real estate opportunities. By diversifying across platforms and conducting due diligence, investors can prudently add commercial real estate to their portfolios. While illiquidity and volatility remain risks, the income, diversification, and passive management benefits make online commercial real estate investing an attractive option for many investors today.
