The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
For those looking to be a passive investor, buying industrial commercial real estate can leave you in an ideal position depending on the tenants leasing your space. For large single-tenant spaces, you may interact with your tenants very little or not at all, only stopping by when repairs to the structure need to be made. However, if you’re looking for more interaction, industrial spaces with multiple smaller tenants is ideal. While the latter may be more “work”, it can also yield more profit in the long run.
Richard Wilson: What would be a passive investor’s experience – their idea was they wanted to get into a passive type of real estate, and they hear that industrial is relatively low management burden after they acquire – how many times per year, or how often are you interacting with tenants as an owner of an industrial piece of property?
Robert Borris: And again it depends. If your investment is you’re buying a single tenant building, building with one tenant in it that’s net leased where they’re paying real estate taxes and the insurance and all you’re doing is fixing the roof if the roof needs to be fixed or foundations and things like that, your involvement with the tenant is almost zero. Unless there’s a problem of some sort and even then it’s not too detailed, so it can be easy. So you buy a building that’s leased for 8 or 9 years to, you know, there’s a whole host of people – tractor supply, Verizon, they do warehousing or a data center for example, a data center you don’t do anything. I mean zero. It’s just an economic deal. If the building has got smaller tenants in it and has leasing, you may not be contacting the tenants, but you will be interacting with property management people and leasing people. So, the smaller the tenants, the more the work. However, the more the profit, too, possibly. Probably.
Richard: Right, makes sense.