5 Cool Reasons Why You Should Invest In Commercial Real Estate
As a smart businessperson, you know that with the fluctuations in the economy and the inflation, the best thing for you to do is diversify your income. Well, as they often say, spread out your wings and lay your eggs in different baskets. You are looking for something reliable and steady that will not give you headache as the stocks and bonds often do.
Perhaps you start thinking of real estate and the benefits it can offer. You are not well conversant with the deep financials nor the legalese involved, but your good sense of thinking that has prevailed in the past years tells you that real estate is the place to be.
Well, if you are thinking along the lines of real estate, then welcome to the greener pastures. Yes, this side is greener, it is no myth. You may want to invest in residential real estate as most people do. Residential property is a popular investment and some people buy many or just one house to feel they have a form of security. Security is important but you can do much more with commercial real estate. Donald Trump is in this game and one of the greatest commercial real estate investors. It is not that farfetched an idea to think you can join the leagues of such financial sharks.
Who can invest?
At the mention of Trump, your mind goes to thinking that not everyone can invest in commercial real estate and if so, who then can do so? Yes, this is not a playing field for all but you can invest in it. If you have read this far then you are highly interested and you do not need to turn back.
It requires a considerable amount of financing and research. The best person to invest in this sector is he who is informed. Getting down to researching yourself may take you a considerable amount of time which frankly being the industrious businessperson that you are, is in limited quantity. Therefore, hire someone who knows much about the sector or get a reputable real estate company to do the work for you.
Now that you are on board, here are the benefits you are about to enjoy in their full measure. Ready to enjoy the fruits of the commercial real estate tree?
1. Increase your cash flow
Nothing beats the leasing rates of a commercial building. The returns are almost instant and impressive. Within a few years, you can get your money back and enjoy a steady cash flow for the months to come.
The space in a commercial building is valued per square foot. The greatest determinant of the rates is the location. Obviously, rates in a city are greater than those of in the suburb. Following the laws of supply and demand an area with great population pressure need for development and great industry will fetch you very high rates and make you wealthy in a few years.
Another factor is the law. Some areas have legal restrictions in constructions meaning that you will not be getting much competition any time soon and the demand will be constant. As you scout for property, keep these two factors in your mind.
2. Long lease contracts
The function of the property, which is for commercial purposes, the need for the tenant to make profit, and the investment involved on their part necessitates the length of the contract to go for a number of years. Long-term tenants in a fixed contract offer more stability and less tenant turnover.
3. The reduced risk
The performance and market cycle of real estate, especially the commercial ones are very different with that of the stocks and the bonds, since it has fewer fluctuations. The risk is further reduced by the low correlation of this investment with other areas. Therefore, as other markets are upset by storms in the form of changes, the real estate market remains unperturbed leaving you safe.
4. Appreciation of property
The value of property for the last ten years has been on a steady rise. Land is one area that is sure to appreciate with every passing year meaning that your purchase of land in the right location today could fetch for about 5 times higher in about ten years. With such stellar records, real estate speaks for itself as the valuable investment.
5. Liquidity
Those who avoid real estate do so for the fear of little liquidity. The trends have changed making liquidity of real estate investment much easier and faster allowing you to make a prompt decision in the even to negative market occurrences. You are no longer tied down.
Brian Taylor is a real estate and finance blogger with Stella Settlements, a leading Perth based real estate settlement agent. Brian likes writing posts about both residential and commercial property buying and selling.
