A Guide to Commercial Real Estate in Central Texas
The Land Up Learning Series
Historically, land has always been a sound financial investment in Texas. In Austin, the average price per acre has appreciated almost 350% between 1988 and 2020, from $5,408/acre to now $24,262. Those are some Texas-sized numbers!
Whether you’re thinking about purchasing real estate for your business or as an individual, In this blog we’ll cover what exactly commercial real estate is and how it can be a great addition to your portfolio (even if you don’t consider yourself a real estate investor!).
What is Commercial Real Estate
Commercial real estate - sometimes written as CRE - refers to properties used for business purposes. Commercial properties are a big part of the real estate market for individuals, businesses, institutions, and of course large enterprises.
When you picture commercial real estate, the first image that may come to mind is a warehouse or a downtown skyscraper. These are great examples, but many types of properties can be used for commercial purposes - including raw land and even your own house!
Types of Commercial Real Estate
Zoned land: properties with local agency approval to be used for industrial and development purposes
Office buildings: properties used for businesses, like offices and coworking spaces
Retail spaces: properties used for selling goods and services, like shops
Industrial properties: areas used for industrial purposes, like warehouses, plants, and facilities
Multi-family residential homes: properties divided to home multiple tenants, like apartments and duplexes
Hospitality properties: buildings used for lodging, like hotels and airbnb’s
Other: buildings used for parking, movie theaters, and other special purposes
Raw land in a great area, like these 2+ acres near Wimberley, can be a great option for Airbnbs and long-term rentals.
Who Can Invest in Commercial Real Estate
The short answer? Anyone can buy commercial real estate!
The long answer? While you don’t need to be a business owner or a professional investor to buy a commercial property, it can require a significant amount of time, effort, and money - and often requires a business-oriented skillset.
The process can be complicated and requires a larger upfront investment. It also often requires that the new property owner works with local agencies, contractors, and even other investors to get the property permitted for its intended use.
On top of being savvy in the set-up phase, commercial property owners need to stay current on the market, property management skills and rules, valuation, legal and accounting processes, and more. Quickly becoming an expert (or working with other professionals) makes all the difference!
What Makes Commercial Real Estate a Good Investment
As you start or continue your search for commercial real estate, here are several considerations to help determine if a property may be a good investment or compare similar properties to one another:
Income: what would be your cash flow through renting or leasing your property?
Appreciation: how much value will your property gain over time due to local demand or competition?
Diversification: will this help add variety to your investment portfolio to reduce overall risk?
Inflation hedge: as inflation rises, how will you change your rates to help maintain your investment?
Tax benefits: are there any deductions, deferments, and expenses that will help offset your taxes?
Commercial land on the outskirts of major cities, like this fully entitled business park outside of Austin, allow owners to be close to the action and potential business - without paying the high downtown prices.
What are the Benefits of Investing in Central Texas Commercial Real Estate
Overall, the Lone Star State has a thriving real estate market. We listed some below, but you can dive in more by reading our previous blog, 8 Reasons to Invest in Central Texas Real Estate:
Strong economic growth
Thriving tech industry
Growing population
Diverse landscape
Tax benefits
Skilled workforce
Pro-business environment
Low stock market volatility
A bonus benefit of Central Texas commercial real estate? Texas is a relatively affordable place to buy properties compared to other major U.S. cities. This allows investors to purchase high-quality real estate without the scary price tag, meaning higher potential returns over time.
What are Some Risks of Investing in Commercial Real Estate
While there are many benefits to investing in commercial real estate, it’s important to not wear rose colored glasses. As with any investment opportunity, there can be risks, including:
The market: local, national, and international economic factors can influence supply and demand for commercial real estate - in turn impacting property values and rental income
Tenants: in order to have sufficient and steady income on rented or leased properties, you must be able to find and keep tenants that can pay on-time and in full
Property management: like all real estate, commercial property need to be maintained and updated - not only to keep your operations up-to-date, but also to stay compliant with regulations
Financing: factors like fluctuating interest rates, debt, refinancing, and ensuring you have enough capital to run your property can all impact your investment
How Do I Find a Commercial Property in Central Texas
While it may be easy to decide to invest in commercial real estate, that doesn’t mean it’s easy to actually do so. As mentioned, the process can be complex - from deciding on the property itself to finding a location that works best for your goals.
This makes working with a local expert all the more important.
Anyone can buy commercial real estate, but not everyone can be a trusted resource to make sure you find the right property for the best deal. Our Land Up Realtors are specialists in the area - we know all about upcoming developments, local rules and regulations, professionals who can help, and investment properties in the area - contact us today to learn more and start your real estate journey.