Fri, May, 2018

TOP REASONS THAT MAKES COMMERCIAL REAL ESTATE A GOOD INVESTMENT

TOP REASONS THAT MAKES COMMERCIAL REAL ESTATE A GOOD INVESTMENT

Now a days there are so many investment option are there, yet people have so many doubts related to the investment, so many questions are there in their mind if they invest somewhere, like “is investment in any specific field secure enough”? How can they take more advantage of their investment in any specific field?

All these doubts and question can be solved by investing in a safer side i.e. in real estate! Means investing in real estate is always a best option. Real Estate has always been a preferred investment option for an average Indian. It is a great way of creating wealth and adding to your asset portfolio. But the asset class in real estate differs on the basis of its use- residential, commercial, hospitality and retail. Residential real estate has always been the first choice of the buyers as they have the option to either put it to their end use or to let it out on rent and earn a handsome rental return. The most proven way of obtaining high returns has been through commercial real estate. The fundamental reasons that commercial real estate is the #1 investment choice are –

Diversity – The first and important thing that an investor looks in his investment is diversity means most commercial properties have multiple tenants. This gives the owner some portfolio balance and diversity – they are not 100% reliant on just one tenant’s rent. For example, if you have a 100 space mobile home park – and one tenant leaves – the impact on the property’s finances is minimal. However, with a stock or bond, you are 100% tied to one business, and if it fails or does poorly, your investment is ruined.

Safety – From investment point of view the commercial real estate is safest business ,most commercial real estate is based on pretty basic needs, such as shelter (apartments and mobile home parks), basic services (retail and office), and storage (self-storage and industrial warehouse). While stocks often revolve around fairly complex business models that are often built on luxuries, commercial real estate is based on strong, perpetual demand.

Revenue – Commercial real estate is always money oriented field, means one can earn money easily without putting down any efforts. Disparate most stocks, which pay no dividends, commercial real estate is defined by its capability to pay out regular cash distributions. This is an exceptionally important peculiarity, as it allows the investor the ability to have greater patience through recessions – since they don’t rely on the sale of the asset for income – as well as give greater security in covering problems that may come up along the way. With most stocks, the only way to realize any income is to sell the stock. With commercial real estate, income is achieved from the cash-flow of the property, regardless of a sale. In addition, commercial real estate has traditionally had the highest returns of any form of investment.

Capital Rise – The ability to create massive wealth through capital appreciation is an even bigger part of commercial real estate than cash flow. It is not uncommon for commercial properties to increase significantly in value of time. In fact, commercial real estate has proven to be one of the greatest hedges to inflation of all investment types. One of the reasons is that rents increase with inflation, and commercial real estate’s value is built upon those rents. If the rents double, then the value of the property doubles – it’s that simple. Inflation also drives up the cost to build new properties, so the values of existing real estate go up to match those new values.

Leverage – This is one of the most important reasons that real estate has proven to be such an outstanding investment type over time. Most commercial real estate is not purchased with 100% cash, but rather with maybe 20% to 30% cash down, and the rest is paid with a mortgage. This ability to buy assets that exceed your immediate cash available allows you to build wealth rapidly. Banks are comfortable with commercial real estate values. Additionally, the values of commercial real estate are very rational – based on stable rents – while stocks are often irrational and have giant fluctuations in value, which scares banks. Because of leverage, investors are able to create much greater gains than any other form of investment.

Decision – Since the founding of our nation, commercial real estate has been the most profitable form of real estate. With a track record of success, higher returns, and greater security, there’s no investment class as attractive as commercial real estate.

 

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