What types of commercial properties should you buy? You should consider the pros and cons of each type of property, as well as have a good understanding of your investment goals and experience. These factors will help you find your ideal commercial property.

The most common commercial property types are listed below.

Apartments/Multifamily
Apartments or multi-family buildings are often the first choice for new commercial investors. Apartment management and financing is very similar to residential, so new investors feel more comfortable with them. The main disadvantage of apartments is that they require intensive management.

For an apartment to be considered commercial property, it must have 5 or more units. There are numerous subtypes of apartments:

Low Rise Garden Apartments

mid-rise apartments

high rise apartments

student housing

MilitaryHousing

Townhouse Style

cooperative

When looking for properties to buy, pay close attention to the location and the general market for that area. You’ll want to avoid properties that are located in economically depressed or seasonal areas. Additionally, the property must have acceptable aesthetic qualities to be competitive with market standards and have a minimum occupancy of at least 85%.

What if the property you are appraising has inferior physical characteristics or is located in an economically depressed area?

You may have a higher interest rate, higher reserves, and tighter underwriting restrictions.

mobile home parks

Mobile homes can be a wonderful investment, especially if you own the land and sell the mobile home. You are only renting land at that time! If you’re new to mobile home investing, you should read “Deals On Wheels: How To Buy, Sell, And Finance Used Mobile Homes For Big Profits And Cash Flow” by Lonnie Scruggs. This book is a gem! Lonnie explains how to buy and sell mobile homes in a note. His presentation is very basic and understandable.

Now back to mobile home parks. Mobile home parks are rated 1-star, 2-star, 3-star, 4-star, and 5-star. Star rating is based on park conditions and amenities.

HAS 3 star The park generally has a mix of single and double width houses that are in good condition. The park is attractive and offers some amenities.

HAS 4 stars The mobile home park usually only has double-wide homes that are bordered and in good condition. Homes will have concrete patios or raised porches.

HAS 5 stars The mobile home park can be characterized as having luxurious accommodations, with a wide range of amenities and services. Homes are generally set back from the curb with paved streets, sidewalks, streetlights, and signs. The park is located in a desirable neighborhood and accessible to retail and community services. Homes are late model double-width and modular homes in excellent condition.

The mobile home park must have at least 85% occupancy and be located in desirable areas. Also, be careful if the park has too many homes for sale (more than 20% of the total homes) or if more than 20% of the total homes are park-owned rentals.

Retail sale
Commercial properties are properties that are occupied by one or more tenants and the property is used for business purposes.

An independent retail mall with an anchor holding it is a well-known commercial retail business such as a national chain store or regional department store strategically located in a mall to generate the most customers for all stores located in the mall. Year unanchored mall it is a center that is occupied by multiple tenants of which none are anchor tenants.

Single Holder Investment Grade Commercial properties are properties leased net to an investment grade lessee (rated BBB- or higher).

Office
The different categories of offices include:

suburban garden office

High rise suburban office

Medical office

Central Business District (CBD) Office

Potential office buildings must have a minimum occupancy of 85% and be located on or near a major thoroughfare and easily accessible. Properties that have more than 20% of total income from owner-occupied or owner-affiliated tenants will generally have a higher interest rate on any loan.

mixed use
These properties will be a combination of any of the property types above. A real estate development of mixed-use properties must be complementary to each other.

Health care
These types of properties are nursing homes, group care facilities, and assisted living. Properties must be close to shopping and community services. Beware of properties in economically depressed or seasonal areas. Also, make sure the property meets ADA requirements.

Hotel
Hotels are characterized as either full service or limited service.

Full-service hotels can be divided into luxury, upscale, mid-scale, and extended-stay hotels.

Limited-service hotels can be divided into mid-scale, economy, budget, and extended-stay hotels. When considering hotel properties, the property must have a stable operating history. A property with a history of four years or less should be examined. The minimum acceptable occupancy is usually 60%. Lenders also prefer franchise-affiliated hotels with franchise agreements that extend beyond the term of the proposed loan.

Industrial
These types of property will be used solely for industrial purposes. What

Warehouse-single tenant

Warehouse-multi tenant

Manufacturing

Investigation and development

flex space

Light industry

Heavy-Industrial

Storage
Also called Mini-Storage, it is used for personal storage for lease by consumers.

Other Specialties
These types of properties are unique and financing can be difficult. include

gas stations, oil change facilities, etc.