Commercial real estate investing is one of the many ways to diversify your portfolio, and there are multiple pathways for doing so. Whether you directly purchase and manage properties or choose to invest in a hard money lender that provides commercial loans, investing in the commercial real estate market might be a good strategy for you.
We’ll share more about the types of commercial real estate, but if you’re not interested in purchasing commercial property, keep reading to learn about an alternative investment option.
Types of Commercial Real Estate
Depending on the market conditions, there is a range of different commercial real estate investment options, including:
Multifamily Homes
Many investors dip their toes into commercial real estate investing by purchasing multifamily buildings with five or more units. This is a good transition for investors who want to shift away from managing single-family rental units because they can leverage their experience and gain efficiencies with multiple units.
Retail
The retail market declined after the pandemic and continues to be relatively unstable with an uncertain economy. This doesn’t mean retail stores are not a good investment, but you must carefully consider the location and type before taking the plunge. Consider essential or irreplaceable retail tenants when buying stores, including those that provide services that can’t be provided online.
Offices
Demand for offices also took a sharp nosedive due to the pandemic, but the outlook for recovery is now more optimistic, if a little mixed. In general, purchasing offices that are already occupied will be a safer bet than investing in vacant spaces. No matter which route you take, carefully research the local market before you buy.
Healthcare
Medical facilities and clinics will always be in demand and are replacing retail stores in some areas. Having a foothold in this area is often a sound investment.
Mixed-Use
Buildings that combine residential units with retail, office, or restaurant space allow you to generate revenue from multiple types of tenants, providing another level of diversity in your portfolio.
Hotels
The success of hotel investments depends heavily on travel and tourism. This market is fairly volatile, so there is both opportunity and risk with purchasing this type of property.
Residential Developments
The demand for housing continues to grow, and development projects are a way to get more homes on the market. If you have experience with development, this could be another avenue to make money without needing to move any dirt.
Tips for Commercial Real Estate Investing
Commercial real estate investing can be lucrative, but it comes with some risk. Follow these tips as you start to test the waters.
Consider the current market conditions.
Choose investments that are expected to perform well in the future. Although conditions will change, unless you have the capital to withstand long-term vacancies, it’s important to be mindful of current and future market demand.
Understand your location.
Every type of real estate performs differently depending on its location. A strip mall might thrive in one neighborhood and fail in another simply because of traffic patterns. Do your due diligence with any property you’re considering and evaluate how the location might influence success.
Analyze similar properties.
To determine whether you’re making a wise investment, you need to understand the value of similar properties, including both purchase price and leasing potential.
Run the numbers.
Understand the costs to maintain the property and what a commercial lease requires of the owner. Budget for repairs and maintenance, and include a contingency fund for unexpected expenses. Make sure your property can be cash flow positive when you need it to be.
Consider an Alternate Pathway to Commercial Real Estate Investing
Did those tips give you pause? There’s another way to diversify your portfolio that leverages the benefits of the commercial real estate market. If you don’t want to actively manage tenants and maintain properties, consider investing in a fund that provides commercial loans. You reap the benefits of regular returns with a lot less work.
Commercial Real Estate Investing Opportunities from Socotra Capital
If you’re considering commercial real estate investing, even as a first-time investor, Socotra Capital is an ideal hard money lending partner. You get fast access to cash—in as few as five days with our Turbo Close®—and have more freedom to find the deals with the best upside. When you’re evaluating your lending options, keep hard money on the table for the most flexibility.
If you would rather take a more passive approach, Socotra Capital offers investment opportunities that provide regular returns with a relatively short lock-up period. We handle all the details of servicing commercial loans, and you get to share the profits.
Seasons change, and so do investment opportunities. Read The Ultimate Guide to Navigating the Real Estate Market in Any Economic Season to learn how to decide which types of investment make sense at different times.
This blog was originally published in February 2023 and updated in July 2025
