Top 8 Commercial Investments Most Investors Don’t Think About

Top 8 Commercial Investments Most Investors Don’t Think About

Top 8 Commercial Investments Most Investors Don’t Think About

What is Commercial Real Estate?

Commercial real estate is any property used exclusively for business-related purposes, or to provide a workspace rather than a living space. Most often commercial real estate is leased to tenants to conduct some type of income-generating activity. This broad category can include everything from a single storefront to a huge shopping center. While we typically think of commercial real estate as retailers, office spaces, hotels, strip malls, restaurants, and more, this list includes many commercial property investments that often go overlooked and hold ample opportunities for income-generating activity.

 

OFTEN OVERLOOKED COMMERCIAL INVESTMENTS

1. Multifamily

Do you consider apartments to be commercial real estate? Not everyone does. They aren’t used for commerce, per se, but they are an important aspect of commercial investments that should not be overlooked.

There are two apartment classes: residential multifamily and commercial multifamily. Residential multifamily is financed with a residential loan, and the values are based on comps. This typically describes buildings with two to four units. Commercial multifamily is financed primarily through a commercial loan. People often make divisions between small and large multifamily based on the size of the staff necessary to run them. These can include dozens of units in an urban or suburban setting or complex.

2. Self-Storage

Another investment that’s easy to overlook, Self-Storage is an enormous commercial investment that big commercial rating groups often overlook considering there has not been a separate classification for this category in many online reports. Self-Storage facilities can be a personal and commercial boon, as there are nearly 60,000 such facilities in the United States alone, which rivals the amount of McDonald’s and Starbucks combined. Self-Storage has become very important and popular over the last decade, and many commercial investors have noticed.

3. Mobile Home Parks

This is an often overlooked, but very valid commercial real estate class and a sublime investment. Many well-known and aggressive lenders (Warren Buffett among them) realized years ago the investment opportunity of Mobile Home Parks, and how these commercial spaces often go overlooked in lieu of more popular investments. In the midst of the COVID-19 pandemic and stock market fluctuations, the investment power of Mobile Home Parks has increased by a percentage in the thousands and continues to climb.

4. Cell Towers

Investing in cell towers might be a commercial investment many are already knowledgeable of or have thought about, especially since the cellular device boom of the 2000s. Since many companies are constantly on the lookout for better coverage by region, investing in rural dead spots to fill needs is an important aspect of this opportunity.

Investors can earn a steady income from this investment for decades in exchange for a quarter acre of land and a deeded easement of access. One viable way to accomplish this is to buy out someone else’s existing income stream for a direct cash payout from you or invest in another person who does.

This sector has grown further during the pandemic, and will only continue to grow in a world that has an increasing need for cellular data.

5. Data Centers

Data centers have enjoyed a commercial explosion over the last several years. As retail’s demise has accelerated during the pandemic, data center demand has soared. Zoom and other online meeting platforms have pushed the limits of existing infrastructure, and companies are in desperate need of locations to establish new data centers or expand old ones. Emerging technologies such as artificial intelligence and 5G wireless are constantly looking for this sort of space.

Luckily, many investors have not yet realized the potential of investment in this sector. This isn’t a mom-and-pop investment, but similar to Self-Storage and Mobile Home Parks there is room for growth if you have the investment capital.

6. Senior Living

Similar to multifamily living, Senior Living is an important investment sector that can often go overlooked. This isn’t for nursing facilities specifically, though it can include that. Many seniors are looking for independent living communities, similar to apartment complexes, to enjoy their twilight years. The increasing popularity of this sector means more investment opportunities for you. Many who have pursued this sector have enjoyed great results.

7. Billboard Space

Billboards are an amazing opportunity. Similar to many other forms of real estate, it’s all about location, location, location. Some billboard companies pay as much as $200,000 a year for a billboard, which is especially true inopportune locations.

Paying attention to the lease and space is important for investing in a billboard. Many billboard companies are looking to put up permanent megastructures in places that are seen daily, and if you notice a billboard with a video sign it is no doubt going to be there for a long period of time.

Billboard investment has to take into account zoning and property laws, but these can change and some billboard signs are grandfathered into the property. Regardless, billboards are a great cash flow investment that can broadly go overlooked by those pursuing other, more obvious opportunities in the commercial investment space.

8. Urgent Care Facilities

As cities and towns change, peoples’ consistent need for medical locations stays the same. These sort of Urgent Care Facilities are oftentimes located as part of broader retail centers, nestled in between grocery stores and gyms. Numerous hospitals are recommending people utilize these as smart alternatives to expensive health trips, and as others use them to avoid the hospital environment entirely, they increase in popularity. Urgent Care Facilities, especially dialysis locations, are becoming widely popular.

Unfortunately, we will see a number of retailers shutter due to the pandemic, but the good news is that these properties are ripe for opportunity in the new sector. Keeping a keen eye for these sorts of investment opportunities will net important cash flow opportunities. As ever, it is important to keep all your properties up-to-date on their electrical, lighting, signage, and technology, ensuring that your investments last for years to come.

 

About the Author:

Caren Ellis is the Marketing Manager at FSG. Her strong marketing skills and divergent thinking have helped the company to serve thousands of businesses. She loves to share her insights on effective construction technologies, property valuations, and practical solutions to the latest industrial challenges.

Big Ideas for your business? A lesson from Burger King’s new big idea…..

Big Ideas for your business? A lesson from Burger King’s new big idea…..

Is your new big idea simply an attempt to escape your poor execution of your last big idea?

I often see business owners trying to do too many things and they don’t do any particularly well.

Today I read a news report that burger king is experimenting with home delivery. My first reaction was…what a terrible idea. Then I gave it some additional thought and decided yep, it is absolutely a terrible idea.

Burger king has been an under performing biz for as long as I can remember. They seem to go from one idea to the next in an apparently useless attempt to hit the jackpot.

When I read the article I said to myself “really? Home delivery? How about you focus on getting me hot french fries at the drive in window. That would be outstanding!”

How good would it be know that every time you pulled into the BK drive-in you got fresh hot fries? I think that would generate real biz.

When I think about home delivery for BK I think…”why on earth would I want to wait for mediocre BK food when I can wait the same amount of time for decent food?”

The question for you is this. Does your business do a few things very, very well or many things all done poorly?

Circular Money and the U.S. Tax System

Circular Money and the U.S. Tax System

Listening to a financial radio station today I heard something that caused me to say…”what?” Here’s the outline:

First the Cash Source:
China has gobs of U.S. dollars that they get from selling us incredible amounts of stuff.
China is catching heat for owning so much U.S. Treasury debt, so they want to use the US Dollars for something other than lending it back to the US Treasury. So why not loan it to U.S. companies?

The Use of Cash:
A big U.S. company, that will remain nameless, pays 1.8% dividend on it’s stock. Note, this is important …Dividends for biz are not tax deductible, meaning companies pay dividends after they pay their tax obligations.

So what to do?
This company borrows US Dollars at 1.7% interest from China. The 1.7% interest is tax deductible which means the effective cost of the interest is about 1.2%…and remember the effective cost of dividends is 1.8% because dividends are not tax deductible. So the cost to the company for borrowing from China is 33% cheaper than the dividend cost.

The solution, borrow US Dollars from China, deduct the interest from taxes and use the cash to buy back the stock which eliminates the 1.8% cash dividend cost and replaces if with an effective $1.2% cash cost.

Incredible but true, another case of the perverted U.S. tax code. Borrowing is more tax effective than returning cash to shareholders as dividends.