What is Commercial Real Estate in the US?
If you are an Indian investor looking to build wealth in the United States, commercial real estate is one of the most powerful avenues to explore. In the US, real estate is strictly divided into two categories: residential and commercial.
While residential property refers to homes designed for living with one to four units, commercial real estate covers anything that has five units or more, or any property used for non-residential business purposes. This includes massive apartment buildings, retail shopping centers, office buildings, industrial warehouses, and mixed-use developments.
For Indian investors, the five-unit threshold is critical to understand. This is the exact line where government-backed residential loans in the US end, and commercial lending rules begin. Moving into the commercial space changes everything from how you secure a loan to how the building is valued by the market.
How US Commercial Property is Valued and Financed
In the residential market, properties are valued based on "comparable sales", meaning a home is worth whatever similar homes nearby have recently sold for.
Commercial real estate, however, is valued entirely by the income it produces. Lenders and appraisers calculate the value of a commercial property by taking its Net Operating Income (NOI), the money left over after operating expenses are paid and dividing it by the market's capitalization rate (Cap Rate).
This means that as an investor, you have the power to force the property to appreciate. If you upgrade the building, raise rents to current market standards, or lower your running costs, you directly increase the mathematical value of the building.
Financing these assets is also uniquely tailored to businesses. Commercial lenders look at the property's income potential first, and your personal finances second.
They use a metric called the Debt Service Coverage Ratio (DSCR), typically wanting the property's net income to cover the mortgage payment by at least 1.2 times. Because the loans are riskier for banks, commercial mortgages require larger down payments, usually between 25% and 35% and often feature floating rates or "balloon" payments where the full loan balance is due in 5 to 10 years.
Understanding US Commercial Leases
The lease agreements in the US commercial sector are a major advantage for global investors seeking stability. Unlike standard 12-month residential leases, commercial leases generally run from 3 to 10 years, and sometimes up to 15 years. These are frequently structured as "Triple Net" (NNN) leases. In a NNN lease, the business renting the space pays the base rent, plus they cover the property taxes, the building's insurance, and the maintenance costs.
Many of these commercial leases also include annual rent escalations tied to inflation, which provides a built-in hedge to protect your returns as the economy shifts. While these long leases significantly reduce the day-to-day management burden for the owner, they do concentrate risk, as finding a replacement business for a vacant commercial space can take several months.
How Raveum Simplifies US Commercial Real Estate Investing
Entering the US commercial real estate market from India can be intimidating due to high capital requirements (25-35% down payments), complex financing rules, and the operational demands of managing foreign commercial tenants. This is exactly where Raveum helps Indian investors navigate the sector safely.
Raveum is a platform that changes how global investors access US real estate, allowing individuals to invest in fractional shares of institutional-grade properties starting from just $1000.
Raveum provides deep knowledge, insights, and expert due diligence to drastically reduce your risk. Before any property is listed, Raveum's team conducts rigorous financial analysis and tenant evaluations, ensuring only premium, income-generating US real estate is offered.
Instead of dealing with US commercial lenders and complex NNN leases yourself, Raveum partners with vetted US real estate sponsors who handle the asset management to institutional standards.
Your capital is invested securely through dedicated, legally verified US entities that comply with SEC guidelines, ensuring transparent reporting and clear legal protection. Through Raveum, Indian investors can seamlessly earn stable, passive quarterly income in US dollars without the traditional barriers to entry.