3 Ways to Invest in Real Estate Development for Profit

Regardless of how much you have to invest, you can profit from investing in commercial real estate development. There are several methods of investment.

Owning Commercial Property for Rental Profit

Real estate developers often own multiple properties that they rent out to businesses. Office buildings are great examples of this. If you have ten floors and each floor is home to a different business, you have ten tenants paying rent each month. Purchasing a property, developing it through renovations and other improvements, and then raising prices for rent is a great way to increase your profits. Real estate development includes not only office buildings but encompasses restaurants, warehouses, apartment complexes, parking garages, and more.

Buying and Selling Commercial Property for Profit

Many developers purchase land and create buildings from scratch to sell to commercial tenants. This can be incredibly lucrative, though creating properties is a much more involved process than buying existing ones. 

Developers need to have relationships with local government officials to expedite the permitting process. You can buy land, but to use it for a specific purpose and then build on it requires permitting from the local government. After permitting is completed, construction begins; developers often own construction companies who will do this work. After a property is built, it can be sold to a business that will use it. 

Ideally, a business will financially commit to the developer that they will purchase or obtain a long-term lease to a property before it is built. If this does not occur, developing a new property is a far higher financial risk. Examples of this include constructing stand-alone restaurant buildings to sell to chains seeking to add a new location, building a warehouse for a manufacturer, or creating an office building for a large business.

Owning Stocks and Funds

A Real Estate Investment Trust (REIT) is a great way to get started investing in real estate development. For a minimum of hundreds of dollars, you can invest in a trust, managed by development experts with decades of experience in profiting from real estate development. 

Investing in a REIT is like a mutual fund in that they pool together money from numerous investors to purchase, develop, and profit from real estate. However, it is not the same: a REIT is its own business, rather than a fund managed by an investment organization. You not only make money from your investment when you sell your shares, but most REITs also provide dividends to its shareholders. 

You can also purchase individual stocks of real estate developers, apart from REITs. Make sure to do your research to ensure your investments will be in profitable stocks or trusts.