Investing in real estate can be a lucrative business for anyone willing to put in the time and effort required to be successful. As one of the safest ways to invest your money, real estate appreciates in value as time progresses, making it an ideal business venture for the market-savvy individual. If you’re thinking about joining the real estate game, you may be asking yourself: who can be a real estate investor? The answer is simple – anyone can – and the Jones Aur Commercial Real Estate team is here to explain who can join the market, how they can get started, and the benefits of investing in commercial real estate.
How to Invest in Commercial Real Estate
Entering the commercial real estate market looks different for every investor, and it all comes down to the way you want to approach your CRE strategy and how much money you have to invest. The Securities and Exchange Commission (SEC) recognizes two types of investors: accredited and unaccredited.
Those who have met one or more specific criteria defined by the SEC are known as accredited investors. These individuals have demonstrated the professional expertise, income, or net worth to prove to the SEC that they require less protection than the average American investor. Because they meet these standards, accredited investors may have more flexibility and opportunity to access more sophisticated investments or higher dollar deals.
To be considered an accredited investor, you must meet at least one of the following standards:
- Have a net worth of at least $1 million
- Have earned $200,000 or more over the past two years
Accredited investors are unlimited in their ability to invest in commercial real estate transactions so long as they negotiate the best deal and maintain their accredited status.
If you don’t fall into the two categories defined by the SEC, don’t worry. Not everyone meets this criterion, but becoming an accredited investor isn’t the only way to break into the real estate game. As an unaccredited investor, you have several investment options.
Real Estate Investment Trusts
REITs allow anyone to invest in commercial real estate with as little money down as they are willing to invest – that’s because they allow you to buy shares in a property, somewhat like you’d buy stocks.
Buy-and-Hold Rental Property
By taking the more traditional route to real estate investment, you can take advantage of the benefits of passive income and value appreciation without accreditation. This process requires a significant amount of money on the front end for the down payment and cost of maintenance, but it allows you to put your foot in the door with a serious investment.
Why Invest In Real Estate?
Whether you’re an accredited investor or not, investing in real estate comes with major benefits.
Create Passive Income: It may seem like passive income is all anyone is talking about these days, but it’s for a good reason. Creating a steady source of income without having to put in extra hours at your day job means you and your family will be more financially stable.
The cash flow that comes from investment properties includes the net income made after your mortgage and operating expenses are paid at the location. By renting out your investment property, you could earn hundreds of extra dollars each month – for each property – all while building equity in your investment.
Similarly, if you invested in a REIT, you’ll receive yearly dividends without lifting a finger.
Appreciation: Breaking into the real estate market means opening up the door to a future payout when you sell. Property values tend to rise over time, meaning the money you invest now will make you even more money in the future. As property value rises, so do rental prices, meaning you could make more passive income the longer you own your property. When you decide to sell your property, you’ll likely make a huge profit because of the added value of your home.
Build Equity: By paying off the mortgage on your property each month (or in your case, by having a renter pay your mortgage), you’re continuing to invest in the equity of your property, which will come back to you in the future. Your equity is a part of your net worth, and as equity rises, you could gain the ability to buy more real estate and expand your investment portfolio.
Invest with Jones Aur
Our experts know how to find the best investment locations in the Mid-South, and with Jones Aur on your side, you will, too. We intuitively understand how to help investors meet their goals, no matter what step in the process they are. With our area-specific expertise, there’s no better team to have by your side as a new investor. Contact our team to get started today!