The list of reasons commercial real estate (CRE) appeals to investors in Texas includes the opportunity to make passive income, the potential for growth and consistent returns on investment. However, commercial real estate is no different than other investment vehicles in that it is important to know how to recognize good opportunities and when it is best to make these types of investments.

The first thing investors new to the commercial real estate market should understand is that not all property types are the same. The main asset types available with CRE include office, retail, industrial, special purpose and multifamily spaces. The supply and demand, as well as the price and profitability of these types of properties, can vary greatly.

CRE investors should also understand that each market presents its own set of circumstances and conditions. This fact is critical to understand because property types that are in high demand in one area may be experiencing a surplus in another geographic location. A bit of market research should minimize the risk of investing in a property type that is oversaturated in a particular market.

Additionally, the real estate market works in cycles, like most other areas of finance. The overall health of the economy, employment rates and reports for the gross domestic product will all affect the profitability of CRE at a given time. The investor that stays abreast of these indicators will have a leg up on the competition.

CRE investors should pay close attention to all the financial documents they can obtain from the previous property owner. These documents may include tax returns, statements of profit and loss, property inspections and others.

Commercial real estate is an exciting method of investing money that has resulted in wealth for many investors. However, the savvy investor will arm him or herself with the knowledge necessary to minimize risk and utilize the best opportunity to see a profit. Individuals considering a CRE investment may benefit from a consultation with an attorney experienced with the process.