There are many different kinds of investments to provide you with a secondary source of income and some good returns. However, commercial real estate has always been the most proven way of obtaining high returns on your investment. Investing in commercial property may the best decision you make in a long time. It’s not a recent phenomenon and dates back to many years. The fundamentals of success for investing in commercial real estate are still the same what they used to be many years ago. Let’s discuss some of these fundamentals.
One of the major benefits of commercial real estate is steady income and higher returns. Unlike most investment opportunities, which don’t pay any dividends, commercial properties are defined by their ability to pay regular and steady cash distributions. This is one of the most important traits of commercial real estate. It allows an investor to have patience during times of recession.
With commercial real estate, you don’t have to worry about sale. You will receive income from the cash-flow of your property. In addition to this, commercial real estate has always had the highest returns on investment.
Commercial real estate is also preferred by investors because it provides the ability to create massive wealth through capital appreciation. Over time, commercial properties increase significantly in value.
According to financial experts, commercial real estate has always been one of the best hedges to inflation. The primary reason is that rents keep increasing with inflation. Thus, a commercial property’s overall value will depend upon these rents. In simple words, if rents double, the value of a commercial property will also double.
It is worth mentioning that commercial real estate is not always purchased with cash. You can buy a commercial property with 20% to 30% cash down payment. The rest can be paid with a mortgage. Since you buy assets which may exceed your cash wealth, you can build wealth rapidly.
Moreover, the values of commercial properties are always very rational. They are based on steady rents. On the other hand, stocks may be irrational and show significant fluctuations in value. This can scare the banks and financial institutions. Since commercial properties provide leverage, investors are able to create higher profits than other forms of investments.
Commercial real estate depends on basic needs, like shelter (mobile home parks and apartments), storage (industrial warehouse and self-storage) and basic services (office and retail). On one hand, stocks always revolve around complicated and complex business models that depend on luxuries. On the other hand, commercial real estate depends on perpetual demand.
Commercial properties can have multiple tenants. Due to this, an investor gets diversity and portfolio balance. The investor won’t just rely on one tenant. But stocks and bonds tie you to just one business at a time. If the business does not perform well, your investment is completely ruined.
For many years, commercial real estate has been the most profitable type of investment. Commercial properties have always had a track record of higher returns, success, greater security and so on.