If you’re searching for ways to “make your money work for you”, then commercial real estate in Iowa is definitely worth your attention.
Investing in commercial real estate is favorable for many reasons, with benefits such as passive income streams, equity appreciation, tax advantages, and more.
Generally speaking, investing in commercial properties (versus residential properties) leads to higher financial rewards while requiring less day-to-day work. However, buying and selling commercial real estate involves a higher level of risk and industry know-how.
But what does all this mean for you, as a potential investor?
To get a clearer picture of the many exciting opportunities within the Iowa commercial real estate space, we’ll need to nail down the basics first.
Let’s learn more about what commercial real estate is, how it works as an investment, and what you can expect when getting started with it.
COMMERCIAL REAL ESTATE BASICS: WHAT IT IS & DIFFERENT TYPES
Commercial real estate is essentially any type of land, development property, or building that’s used for business purposes. It’s often called “business real estate” for this reason.
Typically, commercial buildings fall into the following categories:
- Retail buildings
- Industrial spaces
- Office buildings
- Special purpose buildings
These categories are pretty self-explanatory, but there are some interesting nuances to be aware of. You can learn more about commercial building types here.
Commercial land is also a form of business real estate. Raw land itself obviously isn’t “commercial” in nature, but it becomes home for all sorts of commercial buildings once it’s developed.
There’s an abundance of valuable commercial land for sale in Iowa that’s quickly turning into shopping centers, entertainment districts, and other amenities that signify the impressive pace of Iowa economic development.
Fast-growing cities like Altoona boast some of the most lucrative commercial land properties in the Hawkeye State, offering hundreds of acres of development-ready land with immediate interstate access and beneficial area demographics.
But what makes these properties so lucrative in the first place? How do they make money for you, the investor? Let’s find out.
HOW COMMERCIAL REAL ESTATE INVESTMENTS EARN MONEY
Generally speaking, you can make money in commercial real estate in two ways. The first is through rental income (from tenant leases) and the second is through appreciation (the value of the property increasing over time).
RENTAL INCOME: COMMERCIAL REAL ESTATE LEASING
One way to make returns on your investment is by listing your commercial real estate for lease.
In this scenario, tenants will pay to utilize the space you own. In turn, you will receive rental income that covers your operating expenses and (if done correctly) creates passive income with desirable profit margins.
There are 3 types of commercial real estate leases that you’ll likely run into with your tenants:
- Gross (full-service) leases: more landlord control, fixed costs for tenants
- Net leases: greater flexibility for tenants, reduced risks for landlords
- Modified gross lease: highly customizable, broader range negotiations for all parties
For in-depth insights about these lease types, be sure to check out this article.
PROPERTY VALUE APPRECIATION: SELL FOR MORE THAN YOU BOUGHT
Another way to make money with a commercial property is through value appreciation.
The working principle behind property value appreciation is scarcity—knowing that more commercial land and space cannot be created out of thin air.
As developers build up an area, each parcel of land there will become more and more valuable. The demand for the space will grow higher as it becomes harder to get, meaning prospective buyers will be willing to shell out more money to get a piece.
So, if you own commercial land in a growing area with ever-increasing demand (like Altoona, Iowa) you should expect to sell it at a higher price than when you bought it. The end result? Profit.
There are a lot more nuances to property appreciation, however, as market conditions across the U.S. vary greatly. Fundrise has a great article that goes into more detail about this topic—you can read it here.
HOW TO GET STARTED WITH COMMERCIAL REAL ESTATE INVESTING
To get your feet wet in the commercial real estate industry, you’ll need to find an ideal property that will set you up for optimal ROI. Then, you’ll need to purchase it so you can start turning it into profit.
Before you lock yourself into financing, you’ll want to look at different commercial real estate loan options. There’s a loan to support pretty much any commercial real estate acquisition strategy—short-term fix-and-flip loans, long-term mortgage financing, bridge loans, hard money loans, and everything in between.
Do your due diligence, be patient and thorough, and good things will come.
FIND COMMERCIAL REAL ESTATE IN ALTOONA, IOWA
Seeking a commercial property for sale in Iowa? One of the leaders in Iowa economic development is the City of Altoona, a community just minutes east of Des Moines.
We’re equipped with the leaders, economic tools, utilities, and infrastructure needed to foster long-term development and mutually beneficial commercial real estate partnerships. Plus, Altoona development opportunities are often supported by exciting incentives, grants, and tax credits.
Over the last two decades, Altoona has experienced significant growth, and there are currently numerous opportunities for investors looking to purchase properties or developers looking to build.