Investment & Case Studies
Benefits of Investing in Commercial Real Estate
Though getting into commercial real estate may be intimidating at first, there are real benefits to investing whether you’re looking to expand your portfolio or are considering various investment options.
Higher Income Potential
Because of the property size and the number of tenants a commercial property can potentially hold, the annual return is much higher than other investments, such as stock dividends, which, on average, yield between a 2% to 3% annual return. The range is much higher for CRE, between 5% and 15%.
More Tenants, Less Risk
In a multiple occupancy building, there is less risk of income loss when it comes to vacancies as other tenants are still contributing to covering your operating costs. This is opposed to vacancies on a single family residential, which equals 100% income loss.
Unlike stocks, bonds, and other forms of investment, commercial real estate promises value both the land itself and the improvements on the property, such as structures, infrastructure, and landscaping. Additionally, the needs for CRE properties are fairly stable: housing (apartment complexes or mobile home parks), service industries (retail or office space), or storage and production (industrial warehouses).
Excellent Appreciation Value
Whereas investments like stocks don’t allow for much more than buying and selling based on the market, commercial real estate owners are able to invest in improvements on their properties, as long as regulations are met and necessary local government approvals are secured. A commercial real estate property owner can modernize the property, raise rents, restyle the exterior or interior, or even apply for a zoning change. Inflation can also contribute to the value of existing properties; and while new properties will cost more to develop than older properties, existing locations still increase in value along with the newer local developments.