When you think about investing in real estate, you might think of rental real estate such as apartment buildings or single-family homes. You might even think about investing in commercial real estate such as retail stores. Have you ever considered investing in office buildings? You might be surprised at how lucrative such an investment can be.
Advantages of Investing in Office Buildings
According to Board Member, Katharina Otto-Bernstein of Paramount Group, Inc., office buildings can be a wonderful investment for the long term. Tenants of office buildings usually stay in their offices for a long time, unlike apartment renters who can move very often. Office building rents are usually much higher than apartments, as well. And office buildings can greatly appreciate in value as years go by.
How to Invest in Office Buildings
- Purchase an Office Building
You could theoretically purchase an office building yourself by taking out a loan and paying the loan back with the rent that your office tenants are paying. The problem with this approach is that few people will have the funds to be able to do this. The down payment alone would be too much for most people to afford. Another downside to purchasing an apartment building yourself is that it is not a very liquid investment. It could take many months to sell it again.
- Invest in a Crowdfunded Real Estate Deal
Crowdfunding has become popular for many types of applications. One of these is investing in real estate deals. A real estate developer may have a deal that he or she wants to invest in, such as purchasing an older, partially vacant office building, renovating it, getting new tenants for it, and finally selling it for a profit.
However, the developer may not have enough funding to complete the deal. The bank may only be willing to lend a portion of the amount needed. So, the developer can set up a crowdfunded project for the deal, allowing people to invest in the project for the chance to share in the profits. It can be very profitable to invest in this type of crowdfunded deal, but it can also be very risky. You might lose your investment if the deal does not work out as expected.
- Invest in a Real Estate Investment Trust
Buying shares in a Real Estate Investment Trust, or REIT, is a great way to invest in office buildings with a much smaller outlay of money and less risk. There are REITs that specialize in investing in office buildings. You can buy and sell shares in REITs through a broker in the same way you buy and sell shares of stock.
REITs are very good investments. By law, they have to return at least 90% of their profits to shareholders. And, since they are professionally managed, they are likely to invest in very profitable deals. Another advantage to purchasing shares in REITs is that the investment is very liquid; you can sell your shares at any time.
No matter how you decide to invest in office buildings, it is smart to make this type of investment a part of your portfolio. The potential for good profits is excellent.