The early investor’s guide to breaking into commercial real estate

In a growing city, four longtime friends in their early thirties teamed up to invest in commercial real estate.

Each brought a different kind of experience to the partnership. One owned a small apartment building. Another had renovated houses. A third worked in finance. The fourth ran a construction company. Their first purchase was a modest neighborhood retail center with a handful of local tenants. The rents were slightly below market and the building needed improvements, but the location was strong and the surrounding community depended on the businesses inside.

They bought the property, improved it and chose to hold long-term rather than sell. Refinancing the building helped fund their next investment.

Stories like this are common among private investors. Retail investment in the U.S. totaled approximately $60 billion in 2025, as buyers focused on properties with steady income and stable tenant demand. JLL data show private investors account for a significant share of these transactions. Your first acquisition rarely defines your long-term strategy. What matters most is what you learn from it.

Jackson Safrata, senior vice president of capital markets for JLL Canada, and Sebastian Fahey, senior executive of retail investments for JLL Australia, say investors who gain traction early tend to focus on three priorities:
 

• Think like a business owner and build expertise
• Protect stability by focusing on fundamentals
• Grow with intention through professional relationships

One of the earliest shifts new investors face is mindset.

Residential property is often evaluated through a personal lens. Commercial real estate requires a different approach. These properties must operate as income-producing businesses. As you begin evaluating opportunities, your attention should turn to tenants, lease structures, local demand and income durability. Personal preference needs to give way to disciplined financial analysis.

"The moment you cross into commercial from residential, the rules change. It's not about what you like — it's about what performs.” Safrata explains. “Cash flow, functionality, location, the quality of the tenants, financing. That's what drives value.” 

Private investors often start out best by focusing on a single property type to accelerate learning. Safrata and Fahey note that concentrating on one sector helps you understand rents, tenant demand and local market dynamics more quickly.

For many early investors, retail properties are the most practical starting point. Purchase prices are often accessible, the neighborhoods are familiar and income tends to be predictable. Many of these properties also carry long-term leases where the tenant helps cover taxes, insurance and maintenance, reducing day-to-day management and making income easier to forecast.

Whichever sector you choose, track the metrics that matter. Capitalization rate (cap rate) tells you how a property’s net income compares to its price. Cash-on-cash return shows what you’re earning on your equity. Weighted average lease term (WALT) indicates income stability. More than aesthetics or instinct, these numbers help show what a property is worth before you commit.

Commercial real estate comes with its own vocabulary. These are some of the most important terms to know.

Treat each property as a business decision. Starting in one property type lets you build expertise faster and develop a clearer picture of how commercial real estate works before you expand.

• Is the cap rate in line with similar properties?
• Does the return justify your equity investment?
• Do lease terms provide visibility on income?

If yes across all three, the deal is worth a closer look. If not, dig deeper before moving forward.

As your experience grows, early enthusiasm gives way to a stronger focus on protecting income and managing risk. “The fundamentals matter most,” Fahey says. “Location, tenants and lease structure are what ultimately protect your income.”

Strong markets and steady tenant demand help safeguard returns when conditions change. Markets with strong employment and low vacancy rates tend to recover faster and hold value longer.

Growth starts to matter at this stage, but so does building on a stable foundation. Start by assessing population growth, job diversity and proximity to essential services before you commit. Properties anchored by daily needs, such as grocery stores, pharmacies or service businesses, tend to hold up better when conditions soften.

Lease structure matters too. Longer leases lock in income and make refinancing easier. Borrowing can accelerate your pace, but keep debt levels conservative. A single vacancy can erode returns quickly when leverage is too high. Safrata suggests keeping borrowing at about 60% to 65% of the property’s value as a starting point.

As your portfolio grows, stability becomes more important. Strong locations, dependable tenants and disciplined borrowing help protect income while keeping you flexible as markets change.

For many new investors, borrowing makes larger opportunities possible.

Used carefully, debt can expand purchasing power and help you acquire commercial buildings earlier. Loans from banks and government-backed lenders allow you to control larger properties and build equity while preserving capital for future investments.

Excessive borrowing carries risk in the other direction. Vacancies, unexpected costs or rising interest rates can erode returns quickly when debt levels are too high. Successful investors treat financing as a strategic lever rather than a shortcut.

“Debt can be a powerful tool if you use it wisely,” says Fahey. “The key is making sure the income from the property comfortably supports the financing.”

As you gain experience and credibility, new opportunities start to find you.

The best ones will likely come through trusted relationships. Brokers, lenders and other investors often determine which deals come your way.

Partnerships can help you participate in larger transactions while continuing to build experience and expand your network. “Many of the best deals come through people you’ve worked with for years,” Safrata says.

Over time, these relationships often become your most reliable source of deal flow. Each investment builds credibility and opens doors that market listings can’t. This is especially true in retail. Due to the tightly held ownership structure, 61 per cent of all Neighborhood transactions in Australia since 2020 have occurred off-market. That kind of access doesn’t come from searching listings. It comes from advisors who know what you’re looking for and trust that you can close.

Fahey recommends sticking to a consistent strategy: Follow transactions in your target market. Track what brokers are saying about supply and rent levels. Reach out when you see activity, even before you have a property to buy.

By the time a deal comes your way, the people bringing it to you should already know who you are.

Growth becomes more sustainable when it’s built through close networks. Trusted brokers, lenders and partners can help you access better opportunities, learn faster and expand your portfolio with greater confidence.

The start of a longer journey

Ten years on, the four friends manage a shared portfolio of neighborhood shopping centers and rental apartment buildings. Each has also begun investing independently.

Their approach hasn’t changed: strong locations, dependable tenants and disciplined growth. The first property they bought together did more than produce income. It built experience, relationships and a foundation for what followed.

For many investors, commercial real estate starts the same way. One carefully chosen property becomes the starting point for something larger: a portfolio, a business and, eventually, a legacy.

“Align yourself with people who are going to be in your corner over the next 10 to 15 years,” says Fahey.

Getting started on the right foot in commercial real estate requires more than capital. It requires the right knowledge and the right people around you. Whether you're working on your first commercial real estate deal or expanding your portfolio, our teams are here to help you find the right opportunities and grow with confidence.

Connect with one of our experts to explore how the right knowledge and relationships can support your first commercial real estate investment.