Profit From Commercial Real Estate Investments
Investing in a commercial property is an expensive affair, which few people can afford. Real estate investment, for most people, is usually restricted to the home they buy to live in.
Property investors have now diverted their attention towards the lucrative deals that are presented by commercial properties. This sudden interest is the result of the option to vary your investment portfolio, along with high profits and tax benefits. All the same, before taking a plunge into commercial investment, investors should study the market well.
Hotels, retail stores, business, medical centers, and industrial property come under the category of commercial properties. These properties are operated to gain profit from capital gain or rental income. Some of the most common commercial properties are:
· Multi family units or apartments: These properties are the investor’s first choice. Apartment financing and management are very much similar to that of residential properties.
· Mobile home parks: This investment is profitable only if you own the land and then sell the mobile homes.
· Retail properties: This investment is profitable if more than one tenant occupies the premises and if it is used for retail transactions.
· Offices: This category includes suburban high-rise offices, garden offices, central business district offices, and medical offices.
· Properties used for mixed purposes: This category is a combination of all the above properties
· Hotels: In this the properties are either categorized under limited service or full service
· Industrial premises: These properties are only used for industrial purposes.
· Self-storage units: Consumers use these properties for personal storage or for lease.
· Other kind of properties: These are mainly gas stations and oil change facilities.
As per the research conducted by a reputed New York based real estate research firm, the prices of apartments have risen by 14%, office buildings by 6%, industrial properties by 21%, in 2004. Investing in a commercial property is highly profitable, but it is also a complex business compared to investing in residential properties. There are numerous factors that affect the property evaluation of a commercial property. It is always advisable to conduct a thorough research before venturing into commercial property investment.
Commercial real estate also includes properties used for medical, educational, commercial and industrial purpose. These properties are usable for trade and business, and also can be bought and sold in the market. There is a boom in the commercial real estate investment market due to the growth of business ventures and the improvement in the economy. Another reason for this sudden rise in the commercial estate market is due to the continuous flow of investment capital.
This money is availed from people who are looking for more profitable returns from their investments. The rates for commercial properties are calculated differently from residential properties.
Commercial real estate investment is more profitable because the rental yields are better, and the monthly cash flow is more than that of residential properties. The expected returns depend on the kind of business transactions that would be conducted on the property. The returns of investing in commercial properties are as lucrative as investments in stocks and bonds.
Before you take the plunge into commercial real estate investment, here are a few tips to keep in mind:
1. Look for cities or towns with high occupancy rates for warehouse space and office.
2. Always invest in shops, offices and apartments that are situated in urban areas.
3. Never invest in single use properties that cannot be converted and resold.
4. Don’t pay more than the replacement cost for used properties.
5. Always demand a higher return on smaller and older individual properties.
Investing in commercial real estate may not be for everyone, but they can provide an alternative option for diversifying your investment portfolio.