When people think about investing for their future, they usually think of 401ks, IRAs, or gold bullion. These are all sound strategies, but another investment opportunity often overlooked and that may bring the greatest return on investment is commercial real estate. Here are a few pointers on how investing in commercial real estate works.

Commercial properties exist all around you that bring in profits for their owners. They exist in the form of medical centers, warehouses, office buildings, industrial buildings, apartments, hotels and malls. All of these various structures are also divided by classes. The class represents the quality of the property with class A representing the top and class D the very bottom.

A net lease allows the property owner to create a lease agreement stipulating which expenses the tenant is responsible for, including taxes, maintenance and insurance. A tenant may want to shop around before committing to a triple net lease agreement that includes all three expenses.

A commercial real estate property generates income through leases and appreciation. The rental income is revenue, while the appreciation comes over time as the property increases in value. A property also has the potential to decrease in value if it has fallen into disrepair.

In order to determine if a piece of real estate will generate a return, a potential buyer will have to explore the projected net operating income for the property. This will be the revenue minus any operating expenses. Other methods used to calculate investment potential include capitalization rate, internal rate of return and debt service. All are useful in exploring a property’s potential.

When seeking out properties that have potential, look for real estate locating in areas of high demand. Also, look at areas that might not have potential today, but could in the coming years, especially in areas that could be rezoned. Properties that need a little rehab, such as old apartment buildings, could also be good investments. Last, look for land that could be permitted for development. Sell it for a profit once you have all the required permits.

Commercial real estate requires a substantial investment, which makes it unattainable for many investors. However, finding the right funding and making sound buying decisions can open new doors for investors of any size. Also, starting small and gradually growing a portfolio is a possibility. For anyone looking for an investment with a large return, this type of investment is worth a look.