Commercial real estate is broad especially when you are describing any real estate property that can be used to generate more profit. Some major commercial real estate examples include industrial property, hotels, farmland, malls, warehouses, apartment buildings, office buildings medical centres and more.
The past couple of centuries are proof that investing in commercial real estate can be a great alternative asset. Real estate has provided millions if not billions to investors together with portfolio diversification and attractive risk adjustment returns.Most people, even investors do not understand how commercial real estate is an investment vehicle.
There are very noticeable differences between commercial real estate investments and traditional business investments. In traditional investments, deals are made more frequently and to a secondary market. Real estate are scares resources that hold major value; they are a hard asset to all investors. Other traditional investments are purchased for their value/selling potential while real estate is a source of income as well as long term investment.
Investment strategies for commercial properties are simple; you just have to keep in mind that the demand for a given property depends on the location.
Rental income from commercial real estate
Commercial investment properties come with different arrangements, lease agreements and property management requirements. Here are some common ones
Office – packing decks and cubicles are famous commercial real estate properties. A company is responsible for rental payment on the office space. Office spaces can bring in a surplus in property income.
Industrial real estate – this includes smokestacks, warehouses and more. The typical tenant here is a distribution or manufacturing company. Industrial complexes are not located in the same areas as retail or residential properties.
Apartment buildings – they come in all different structures. Multifamily apartments typically house families of individuals as the tenants. The lease can be long or short term, the longest being 1 year and shortest being a month.
Appreciation and value from real estate property
You can benefit from an increase in the value of the commercial property over a period of time. Appreciation by demand, value add approach and others can increase the intrinsic value of property and its ability to earn the owners more income. Keep in mind that properties can also lose their values depending on the structure, location, renovation periods and more. Purchasing commercial property is a risk, even the most secure real estate property can lose its value when affected by outside economic forces.
3 facts about commercial real estate
Commercial real estate property is everywhere- offices, retail space apartments and many others also count as commercial real estate property.
Commercial real estate brokers/owners earn money through income and appreciation. Income from real estate property is earned through building operation while increase in property value overtime leads to appreciation
Investing in commercial real estate property will require your expertise, time and capital. This means that only the everyday investor can afford to make massive commercial real estate investments.
Unlike other forms of investment, commercial real estate can provide you with a lifetime of income when everything is done right. This mean the research, location, maintenance and more to add value of the property over time.