Commercial Real Estate

2019’s Top Real Estate Niche for Low-Effort, High-Reward Wealth Building

Expertise: Personal Development, Commercial Real Estate, Real Estate News & Commentary, Landlording & Rental Properties
69 Articles Written
Young woman looking over the City of London at sun set.

Sarah is a very smart lady with great real estate experience and significant funds to invest. So, why was Sarah in such angst?

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She was on the phone with me, pondering how to improve her investment results. The market in her region was not great, and we were discussing how she could invest in a different location.

The Struggle (to Succeed Independently) Is Real

She was struggling through all of the logistics of finding a Realtor, finding a property, and managing it, plus collections, vacancy, and what happens when a tenant trashes the unit and skips town.

“It’s hard enough doing this in my own backyard. With the crazy prices here and now this rent control thing, I have to invest in a different state. I’m not sure where to go from here.”

Sarah didn’t want to spend every waking minute consumed with all of these details. Though the thrill of chasing the acquisition was exhilarating, the rest of the work involved is frankly not always that fun or profitable—regardless of what we’ve all seen on HGTV.

We discussed what it would look like for her to invest passively instead. She thought it would be great to expend less effort and make the same (or better) returns.

Watch This: A Great Path to Real Estate Wealth…STOP Investing in Real Estate Deals!

There Is a Better Way to Build Wealth

That’s when the lightbulb went on for Sarah.

With excitement, she said, “Why should I work harder than I need to… to make less than I could?

Sarah realized that she could invest in commercial real estate that works for her. That is the beauty of passively investing with professional operators in a diversified fund.

strip mall with clothing storefront in view

Consider Investing in Commercial Real Estate

Now, I realize this won’t apply to many of you BiggerPockets readers. You are going at this full time, and you have the skills, experience, and resources to do this on your own. So, if that’s you, you can ignore this or read on. But please don’t shout me down.

This may apply to those of you who…

  • watched the flipper shows on HGTV and believe it’s really that easy.
  • have got the real estate bug but are tied down to a daily 9 to 5 (for now at least).
  • have a high-paying job and could make far more staying there and investing passively.
  • are spending almost every spare moment chasing elusive deals in this overheated market.
  • have a property and are working for under minimum wage to rehab it in your spare time.
  • have tried to build a portfolio of rental houses and found it’s much harder to manage than you thought.
  • fear a recession and realize that the deals you’re looking at will be in trouble when it hits.

For decades, investing in a portfolio of commercial real estate assets was considered the playground of the wealthy. Average investors like us couldn’t get access.

A great majority of The Forbes 400 wealthiest Americans invests in commercial real estate. This is how many of them obtained their wealth, and this is how others accelerate its growth.

And their friends in Congress have made real estate a taxpayer’s dream. After all, it’s widely known that commercial real estate provides powerful opportunities to force appreciation and expand wealth–with limited risk–in a way that I haven’t seen anywhere else in my 30-plus years in business and investing. The tax advantages really are powerful.

Why Commercial Investing Is No Longer Reserved for the Rich & Powerful

As a result of the JOBS Act, the online revolution, and a variety of other developments, the doors are wide open for the masses to invest in these commercial real estate opportunities. Crowdfunding sites, individual syndicators, and funds provide unprecedented access to a wide array of opportunities. And through a direct ownership structure, investors get all of the tax deductions they would get if they owned and operated these assets as a solo investor.

Here’s the thing: By investing with an ethical professional operator—one whose track record precedes the Great Recession—investors can usually make better returns, accelerate their wealth creation, and enjoy the same tax benefits. And after a strenuous vetting process up front (don’t skip this!), a passive investor’s effort really will consist of walking to the mailbox to collect their quarterly distribution check.

Like Sarah said, “Why work harder than you need to… to make less than you could?”

“Hold on, Paul. If this is so easy and profitable, why doesn’t everybody do it?”

Great question. I have a short list of potential answers:

  1. Many don’t know about this opportunity. Or they haven’t taken a careful look.
  2. Many investors love the thrill of the chase and the joy of doing this on their own—even if it is less profitable. (I get that.)
  3. Some investors don’t know who to trust. They’ve been burned before, and they feel they need to stay in control of their cash and their deals. (I understand this, too.)
  4. You’re not an accredited investor, and most of the best deals are limited to them.
  5. A few of you (very few) have the experience, risk tolerance, resources, and deal pipeline to go this alone. So, you don’t see the point of sharing your profits with someone else.

Modern apartment buildings exteriors or Contemporary Architecture Office In The City.

If you’re a part of the first three groups above, I would encourage you to take another look at the potential of investing passively. Many investors have discovered that the joy and profitability are unsurpassed. This path is not for everyone, but I venture to bet this is the most profitable path for the vast majority of investors.

If you’re in group No. 4—you’re not accredited—there are some crowdfunding opportunities that you should look into. Some of the crowdfunding portal deals and individual syndication opportunities are outstanding.

Related: How to Use Crowdfunding to Finance Your Commercial Real Estate

I’m in a mastermind group with a bunch of sharp syndicators and fund managers. We all provide our investors deals like this. Many of us are seeing returns of 15 percent or more annually. Some deals have much higher returns than that and are geared to be recession-resistant.

You can’t trust everyone. But if you decide to invest passively and you have carefully vetted someone you trust, I would venture to say that you will end up with the highest predictable, risk-adjusted, tax-advantaged returns per unit of effort available in the investing world today.

My Experience as a Commercial Real Estate Investor

I’m not touting something that I don’t do myself. I have been directly involved in real estate investing for almost two decades. I have written three books on real estate investing and have been a guest or host on over 300 podcasts. I could continue to acquire, own, and operate my own deals.

But when this lightbulb went on for me a few years ago, I began vetting operators whose teams had decades of experience and acquisition pipelines I could only dream of. I recently sold a pricey piece of real estate, and I invested all of the proceeds in a portfolio of deals that I don’t operate directly. And I couldn’t be happier or more thrilled with the results thus far.

My company has reinvented itself to vet operators and invest passively with them. We get the peace of mind of knowing that our assets are managed by a team of professionals who have been doing this since before the Great Recession and who are investing alongside us investors. But we let the professionals do the heavy lifting.

Let’s face it. We can’t all be experts in everything.

I was on the phone with an oral surgeon recently. He was building a portfolio of 20 single family rental homes to provide for his retirement. But it was driving him crazy.

“I’m on the phone with painters between surgeries. And the vacancies take time to fill. I was planning to buy 20 of these. I’m only on number three, and I’ve had it! There’s got to be a better way!”

I asked him the same question I asked myself—which is the same question I’m asking you…

Why are you working harder than you have to… to make less than you could?

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Let’s talk in the comment section below.

After graduating with an engineering degree and then an MBA from Ohio State, Paul started on the management development track at Ford Motor Company in Detroit. After five years, he departed to start a staffing company with a partner. They sold it to a publicly traded firm for $2.9 million five years later. Along the way, Paul was Finalist for Ernst & Young's Michigan Entrepreneur of the Year two years straight. Paul later entered the real estate sector, where he completed 85 real estate investments and exits, appeared on an HGTV Special, rehabbed and managed dozens of rental properties, developed a waterfront subdivision, and started two successful online real estate marketing firms. Three successful developments, including assisting with development of a Hyatt hotel and a multifamily housing project, led him into the multifamily investment arena. Paul co-hosts a wealth-building podcast called How to Lose Money and is a frequent contributor to BiggerPockets, producing live video and blog content on a weekly basis. Paul is the author of The Perfect Investment—Create Enduring Wealth from the Historic Shift to Multifamily Housing (2016) and is the Managing Director of two commercial real estate funds at Wellings Capital.

    Cindy Larsen Rental Property Investor from Lakewood, WA
    Replied 25 days ago
    I am in group 3. I don’t know how to vet syndicators. Therefore, for me, these are high risk investments. Are there any resources you can recommend, to help me learn how to make these be low risk investments?
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 23 days ago
    Hi Cindy. I understand! Check out this site: https://www.therealestatecrowdfundingreview.com/blog . Ian Ippolito does a great job reviewing syndicators and he has a private site for investors only.
    Christina Morgan
    Replied 24 days ago
    #3 here as well. How do you vet syndicators? They make me very nervous, which means high-risk to me as well. I'm going to search through your podcasts and see if you've already answered this question somewhere. Thanks for the article!
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 23 days ago
    You're welcome, Christina. Here you go: https://www.therealestatecrowdfundingreview.com/blog
    Dorys Prentice
    Replied 24 days ago
    I'm in group 4... what crowdsourcing entities should I be researching?
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 23 days ago
    Hi Dorys: There are many. Including Crowdstreet, Realty Mogul, Fundrise and more. You can also visit the previously referenced site: https://www.therealestatecrowdfundingreview.com/blog
    Curt Smith Rental Property Investor from Clarkston, GA
    Replied 24 days ago
    I've done both SFR and commercial and dollar for dollar I make 10x more from SFR. What isn't stated here is commercial is an active business. You buy a 64 door MF you just bought yourself a full time job. True true hire a PM, ok now you 6% cap MF cash flows that much less. Its not all roses in commercial land with rock bottom cap rates, deals left are in marginal areas etc. I bought 20 more SFR doors since I was a partner in commercial deal where my commercial partner didnt buy another commercial deal and was working 100% looking for more deals since our first commercial partnership... For a better SFR business model read the Bullet Proof Portfolio paper / file linked off my profile first paragraph. That surgen needed to deligate to a PM. I self manage with little effort but Drs need to use PMs that was crazy to use that example of why SFR is bad! :) Each side (sfr vs commercial) cherry picks the virtues etc. YMMV. :) Don't mis read me, I'm not raining on commercial / MF, I'm just saying its not black and white good / bad, each deal and each investor will have different experiences.
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    Curt, I truly appreciate your comments here. I TOTALLY agree that the surgeon and others should have gotten a PM. The issue I am raising is that most of the dozens of people I speak with monthly do not. I am talking about that mindset and that model... but I may have failed to clarify that. I agree that there is not one right or wrong asset class. Turnkey companies are crushing it in SFRs.... and many of their passive investors are getting the benefits of that. I am arguing that for most investors, they would be better in that passive seat. There just aren't that many experts out there. As an analogy, look at how many high school football players there are. But how few (way under 1%) make it to the pros. Thanks again!
    Tyler McAllister
    Replied 24 days ago
    I’ve been in the multi family game for many years. However, syndication seems like a viable option to me as I get closer to retirement. How do I vet potential suitors? YieldStreet??
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    Tyler: This is the best place I know.... Check out this site: https://www.therealestatecrowdfundingreview.com/blog . Ian Ippolito does a great job reviewing syndicators and he has a private site for investors only.
    Tarek Okail
    Replied 24 days ago
    All that is great, but it has no action steps. Concrete steps someone can take to get started.
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    Tarek, I will be happy to give you some concrete steps. I have a few eBooks that I just did that will be very clear. If you would like copies of my eBooks, please contact me.
    Tuan Hoang
    Replied 24 days ago
    Great article! This hit close to home! Being an oral surgeon myself lol I'm #3... I found a few syndicators and signed up to get information, only to be turned down because I am not a US citizen (resident alien on a work visa). I just invested on a crowdfund website, but would love to find individual syndicators I can trust and would be eligible to work with
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    Tuan, That is odd. Reach out to me at my profile if you wish and I think we could provide some guidance. You can reach me at my website as well - see profile.
    Dai Hai Ngo Rental Property Investor from Irvine, CA
    Replied 24 days ago
    An interesting article ! I am totally agree with Paul, yet the others might not depends on individual situation. I have spent the last 2 years for vetting many Sponsors from some crowdfunding platforms like CrowdStreet, RealCrowd, EquityMultiple, ... and from other investors' referrals, then I have invested in several projects with the most seasoned, tenured Sponsors (as my own DD). So far, the returns are good. I would love to connect with other like-minded investors to share about the vetted Sponsors and investment opportunities.
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    Hi Dai, This is the best place I know.... Check out this site: https://www.therealestatecrowdfundingreview.com/blog . Ian Ippolito does a great job reviewing syndicators and he has a private site for investors only.
    Roger Kelley Specialist from Denver, CO
    Replied 22 days ago
    I'm using Realty mogul- and it is a 5% return, not up to 15%. Not accredited, so you may be looking at private placements? If I could get a reliable 15% I would switch more money into that.
    Trina Dang
    Replied 21 days ago
    Hi Paul I'm thinking to buying a commercial building, sports center. The whole building is current use for gymnast. Any advise?
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    Hi Trina, I am not at all knowledgeable about that type of asset. I would try to track down a mentor that knows that exact type of building before I would do it. Alot of folks are nervous about buildings with one large tenant.
    Natalia Filipof
    Replied 20 days ago
    Hi Paul, I’m just starting out and I am interested in crowdfunding. What do you think about Fundrise? Natalia
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    This is the best place I know.... Check out this site: https://www.therealestatecrowdfundingreview.com/blog . Ian Ippolito does a great job reviewing syndicators and he has a private site for investors only.
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    Hi Natalia. I've heard good things about them. You can also check Ian's site: The Real Estate Crowdfunding Review.
    Paul Moore Rental Property Investor from Lynchburg, VA
    Replied 19 days ago
    This is the best place I know.... Check out this site: https://www.therealestatecrowdfundingreview.com/blog . Ian Ippolito does a great job reviewing syndicators and he has a private site for investors only.