The Perks of Investing in Commercial Real Estate
Why should you invest in commercial real estate?
Commercial real estate is a lucrative area for investment. The Real Capital Analytics (RCA), “which tracks national commercial real estate sales of $2.5 million and greater, estimates that more than $560 billion of commercial real estate was sold in the U.S. in 2019” (CBRE Leads U.S. Investment Sales Activity For Fourteenth Year In A Row In 2019). This is a big business, just waiting for you! Below are a few of the perks of investing in commercial real estate.
4 Reasons to Invest in Commercial Real Estate
1. Return on investment and Cash Flow
“Generally speaking, commercial properties have a better return on investment, an average of six to twelve percent….commercial real estate provides a lower vacancy risk, as properties tend to have more available units” (Commercial Real Estate Investing 101: How to Get Started). With commercial tenants having longer leases than residential ones and are less likely to vacate, there is more security in getting a return on commercial property investment. And with rent coming in regularly, there is more cash flow in commercial real estate.
2. Commercial Real Estate Increases in Value
“It is not uncommon for commercial properties to increase significantly in value [over] time,” creating capital appreciation (What Makes Commercial Real Estate a Good Investment?). With inflation, rent rises, which raises the property’s value and cash flow, and new commercial properties being built nearby means existing commercial properties increase in their value as well.
3. Diversify Your Portfolio
Most commercial property spaces carry tenants of different businesses, which diversifies the commercial property owner’s portfolio and means they are not dependent on one or two tenant’s rent.
4. Professional Benefits
Commercial real estate is more business-oriented, with less of the emotions that come with residential real estate. Unlike residential real estate, where you may be on call 24/7 (like running an apartment complex), commercial real estate means you usually work normal business hours like your tenants. There is more of an atmosphere of professionalism and can be great for networking within your local business community.