We have been discussing the five categories for real estate investment property.
For each of our discussions, we selected a category from the list below and elaborated on the advantage and disadvantage of owning that type of real estate investment. In this final segment we will discuss retail shops and shopping centers, and what it means to the real estate investor.
- Land speculation
- Single-family homes
- Multifamily properties
- Commercial and industrial properties
- Retail shops and shopping centers
Retail Shops and Shopping Centers
Not unlike commercial and industrial property, retail shops and shopping center property are not for purposes of habitation, but differs in that the majority of rentals in a multi tenant situation will be retail and service-oriented shops rather than office space.
A typical business district in almost any town in the world is apt to have individual shops lining the main streets for several blocks, so finding retail shops and shopping centers is relatively easy.
Advantages of Retail Shop and/or Shopping Center Investments
The biggest advantage in this kind of investment is that it serves a general need of the community, and if the investor has chosen the location well, it is doubtful that there will be a high vacancy factor.
Retail shops and shopping center investing, therefore, can be very profitable if the circumstances are right and the investor sees the opportunities in time to take advantage of them. Moreover, in established areas it is relatively easy to see the trends and flow of traffic and does not take long to tell which area is improving and why, and which area is losing ground and why.
Disadvantages of Retail Shop and/or Shopping Center Investments
The main disadvantage is in dealing with the tenants. It can be tempting to fill a vacant space with a tenant that is less than ideal, yet by introducing the wrong kind of tenant into the area, a downhill slide can start that will eventually cause other vacancies.
As a result, it is important for the investor to be as selective as possible to continually upgrade the status of the building and at the same time to maintain a certain status of the building or the street.
Buying Retail Shop and/or Shopping Center Investments
Many of these buildings may be for sale even though there is no sign out front because most property owners do not want their tenants to know the property is for sale. The investor will have to check out through deed records in the courthouse or ask for deed searches from members of the real estate industry.
Nonetheless, this type of real estate investment property is usually located in limited areas along main streets so the search is relatively easy; and the investor who digs up the information and acts on it stands a good chance of uncovering a good real estate investing opportunity.
Buying large retail space is not for the novice investor unless there is sufficient capital to hire managers with that kind of experience, however. First time investors should consider small strip stores or small buildings with several shops as the best way get into this category of real estate investing relatively safely.
The important thing is to watch for trends when investing in retail shops or centers. A decline in rents with increases in vacancy factors due to a temporary situation, or a moderate to strong rental market area that is about to experience an event that will have a strong, positive impact on rental space.
The savvy investor who spots one or both of these in a retail shops or shopping center building, and makes a deal, stands a good chance of getting on the “ground floor” of a real estate investment opportunity and can open the door to profitable investing.
