Commercial Real Estate (CRE) investment provides savvy investors a wealth of advantages. Tax benefits, cash flow, and leverage among them.

The 2008 recession seemed like Armageddon for many real estate investors. Those who were new to the game (and made rash decisions as a result) may have been surprised to learn that the recession of the late 1980s and early 1990s was worse.

A boom market makes real estate investing look easy. Investors chasing fast yields flood the market, bidding properties up to the point where the yield isn’t there.

Investors looking to diversify their portfolio often consider investing in commercial real estate. Some will start by buying small multifamily properties, two or four units at a time. When the time comes to buy more substantial commercial real estate properties, such as an office building, most investors aren’t sure where to begin.

Commercial real estate is on a substantial uptick right now. With interest rates at all-time lows, employment at all-time highs, the economy booming, and occupancies high, it’s hard not to remain confident that for the foreseeable future, commercial real estate is going to remain on an upward trajectory.

Walk through any major city whose skyline is dotted with skyscrapers.

Look up.

At first glance, it might seem that these office towers are out of the reach of average investors. These properties are generally reserved for only the highest caliber investors, or those known as “institutional” investors.

Although it might be very “sexy” to land a giant corporate tenant, this could be a terrible mistake for the landlord. Many office building landlord’s will go to great lengths to land a major corporate tenant to lease up all or the majority of their property. On the surface, this may seem like a great idea.

Real estate investors often look at the highest IRR when comparing one investment to another. But, in commercial real estate, such criteria is potentially short-sighted. Instead, investors should be evaluating commercial real estate opportunities by looking at their risk-adjusted returns – not just the overall IRR.

Real estate professionals tend to be old-school. A room full of investors, brokers, and mortgage lenders may resemble an episode of Mad Men more so than an episode of Silicon Valley, complete with the bourbon and the blue blazers. Real estate, they say, is a business of relationships—a series of handshakes, meetings, and phone calls, learning who can play ball and who can’t over luncheons, mixers, tee times, and kids’ graduation parties. That’s how deals get done.

Most real estate investors understand the value of a good property manager as a key member of their team.
Do-it-yourself (“DIY”) property management is way too time-intensive for serious investors. That time is better spent finding more deals. Even if you make a little less money each month by paying some of your gross income to a property manager, you could end up purchasing five, ten, or twenty properties with a fraction of the effort.