Commercial real estate investment is something to look into if you are looking to diversify your portfolio in a small-risk way. Here is what you can expect as a commercial real estate owner:
What Rates of Return Are Common?
According to Investopedia, commercial real estate investments do well. They outperform the S&P 500 index, averaging around 9.5% on a 20-year investment. It looks like commercial real estate averages do well, but how do they compare to residential real estate? Actually, you might be surprised that residential real estate does slightly better in a competitive market. However, there are different personalities that go along with commercial landlords and residential landlords.
Who Should Be a Commercial Landlord?
You would make a great commercial landlord if you are someone who is active about managing your investments. With the help of a skilled real estate broker, you work to find market opportunities that will turn a positive cash flow. You may not be as interested in the ins and outs of renovation or tenant management. These commercial properties tend to be well-designed and well-maintained already, and the tenants are less high maintenance than some residential tenants. Plus, the leases are longer on average, with 5 and 10-year lease options being common.
On the other hand, residential real estate owners tend to be more involved with their properties. Some of the great returns on properties come from actively managing and improving the home so that it gets a higher selling price. It can be more work, and that can well make up for the small difference in the investment returns. Consider it as almost a part-time job since you will need to be on call more often for these properties.
How Do You Evaluate Commercial Real Estate Options?
Are you interested in buying commercial real estate, but don't know where to start? Just as you would have a fund manager manage your investment strategy, it makes sense to pick a long-term real estate broker and stick with them. They will have your interests over the long term, letting you know when you should consider selling your commercial real estate holdings for a profit. Although commercial properties require some capital investment, they can be worked just like stocks or any other investment asset. But ideally, you'd have a manager who lets you know how to manage these properties correctly since the commercial real estate markets fluctuate with the economy.Share