Investment in Real Estate is the most tested and trusted one. It has proved its mettle in many drastic conditions, like fall in economy, during Corona and even during monetization. Each and every time, it was the real estate that bounced back to feet before others and that too with very minor loss. Among the various types of real estate investments, investing in Commercial real estate is more profitable but it requires more investment too. Moreover, one should always contemplate before investing in Commercial property.
1. Commercial Real Estate Investment
Commercial Real Estate is a rapid and continuously budding market but it is necessary to contemplate before investing in commercial property. It includes businesses, retail and office spaces. Any real estate that is used to carry out business operations is considered as commercial real estate. It doesn’t include any type of residential property. Because of real estate investment trusts (REIT) investing in a commercial property has become more cost-effective and less time-consuming. Investment in real estate can generate a consistent income flow in the form of rentals.
Commercial property investment offers steady growth and financially rewarding results that continue for years. This investment is safe and secure from price fluctuations and is a long-term investment. Due to the lock-in period, your investment remains shielded while guaranteeing returns. If the commercial property is in a strategic location, then it turns out to be a gold mine as it will be widely valued by a particular section of renters. Commercial real estate investment turns out to be a passive income stream. Commercial Property includes the following:
1.1. Real Estate for Office Spaces
As the name proclaims, the space used for office is considered to be office space and it is in demand due to its multi-tenant capacity. Office spaces include Commercially Zoned Homes, Medical Offices, Suburban Office Buildings, Central Business District: business districts that house a collective group of big companies; etc. A commercial property can become a multi-tenant property based on the property’s style and location.
1.2. Industrial Real Estate
Investors feel it relatively easy to enter this sector due to its low entry cost and flexibility. This sector accommodates industrial activities, including production and manufacturing units for businesses that include bulk warehouse, flex warehouse, heavy manufacturing, light assembly, cold storage, showroom, etc.
1.3. Retail Real Estate
Retail Real Estate properties are centrally located in the heart of the town and are easily accessible. These properties house those businesses that sell products and services directly to customers. This category includes community retail centres, power centres, regional malls, neighbourhood shopping centres, and more.
1.4. Hospitality Real Estate
This category of Commercial Real Estate serves travellers and people looking to unwind and Hotels, resorts, entertainment parks, home-stays, and more are included in this sector. Hotels of all types are covered under this category.
2. Benefits of Investing in Commercial Property
Investing in Commercial property brings in consistent returns, regular flow of income and also holds the advantage of multiple income streams. This type of investment has a higher rent, high prices and also a very high potential to yield financial results. The only precaution is that one should always contemplate before investing in Commercial property. This is a great way to increase your wealth. Here are a few benefits of investing in Commercial Property.
2.1. Steady Cash Flow
By investing in Commercial Property, one remains stress free because the income remains stable even when the financial market is volatile. Real estate investment never gets affected with the volatility of the financial market as compared to other investments, like shares and stocks. It also yields more income as compared to other types of income; no doubt the investment is also more here.
2.2. Builds Considerable Equity
Investors build up their wealth by investing and the amount of value an investor has built up over a period of time is known as Equity. By investing in Commercial property, one gets steady and relatively high returns, so the investor can build equity quickly and can also witness significant benefits as the property appreciates in value.
2.3. Can Leverage Significantly
Since the payment for a real estate property is done either by mortgage or down payment, the investors feel that it is profitable to buy an asset in this way. They don’t have to pay in full; still it is advantageous as it increases their leverage. One also enjoys higher gains as compared to other forms of real estate investments.
2.4. Has More Intrinsic and Appreciation Value
Commercial properties have always provided excellent appreciation value as compared to other types of Real Estate investments. No doubt the investment in a commercial property is also more. This type of investment has a solid intrinsic value too. It is a hard asset and the right location will keep investors safe from loss of cash inflow.
3. Contemplate Before Investing in Commercial Property
Though investment in commercial real estate is considered to be one of the best investments for passive income, it is essential to Contemplate before investing in Commercial Property. The investors should carefully examine their financial health, investing goals, risk-bearing ability, and profit-generating timeline.
One needs a hefty amount of capital to invest in a commercial property. In addition to this one also needs vast practical knowledge, immense information and experience about commercial Real Estate. The investor should also have knowledge of its legal and financial aspects. One should also look out for structural condition and aesthetic appeal of the building and the location where it is situated. Estimated costs of maintenance and renovation, if required should be considered. As an investor, you should also check the estimated monthly income predicted, to be generated by the property. The Scope of future appreciation, returns and profits from that Commercial property should also be analyzed. It is essential to contemplate all these factors before investing your hard-earned money in a commercial property. The returns on investment of Commercial property are very luring but a wrong step may tumble down your investment. Hence it is necessary to contemplate before investing in commercial property.
Written by Nikhil Gattu
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Written by Nikhil Gattu
