How to Get Started in Real Estate
Andrew Carnegie, the 19th-century industrialist and one of the wealthiest people in the history of America once said, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”
Hearing this quote made me wonder, how does one get into real estate? After being exposed to the real estate world, I realized that there are a lot of ways to get your start, but there is one way that can help you take the first step in the direction of owning one of the most stable, safe, and secure types of investment: commercial real estate.
Commercial vs. Residential Real Estate
The benefits of a commercial real estate investment can’t be overlooked. Commercial properties boast:
- Higher returns
- Qualified tenants
- Triple net leases
- Longer lease terms
- Properties that are easy to increase in value
However, compared with residential real estate, commercial real estate deals are usually more expensive. Because commercial properties are usually larger, in more central locations and often with more extensive services and resources than residential properties, they are more valuable than houses where people live. Understandably, their high cost creates a barrier to entry for new investors. While the price of a residential property might seem more feasible, don’t give up on a commercial real estate property just yet.
Tenant in Common Ownership
If you don’t have millions of dollars to buy a whole commercial real estate property but still want to enjoy the benefits of a commercial investment, there is an alternative, and tenant in common ownership (or TIC ownership) is the answer. TIC ownership is when a commercial property is owned by multiple owners (up to 35), each owning a “percentage” of the real estate in the form of a fractional deeded interest. That percentage correlates to their monthly return, so if one paid to co-own 25% of the deal, they get 25% of the rent paid by the tenant each month.
Instead of feeling like you have to wait until you have access to millions of dollars to buy a whole commercial building, you can use tenant in common strategies for deals as small as $100k (depending value of the asset) to invest in commercial real estate. This allows for the barrier to entry to be removed and for you to get an earlier start in commercial real estate, avoid the woes that could come with owning residential property, and a vehicle that provides you monthly passive income (along with the tax advantages of owning the real estate).
Additionally, this type of ownership can allow for more diversity in your portfolio if you were to place your money into several different properties instead of one asset.
So if a stable, safe, and secure investment in the commercial real estate sphere sound appealing to you as an investor, consider tenant in common ownership as one more way to gain access to a world of higher relative returns, and low landlord headaches.
At Millcreek Commercial, we specialize in TIC ownership in high-quality, national commercial real estate assets. With properties at the ready, we definitely have a deal that would be just right for you. Check out our inventory or schedule a call so we can help you get started.