An investment is essentially putting one’s money or capital into a variety of assets with the aim of gradually enhancing the value of money being invested over time. The popular avenues of investment today include Gold, Fixed Deposits and Bonds, Financial Markets, Cryptocurrency and Real Estate, both commercial as well as residential. Different investors prefer different modes of investment and even a mixed portfolio based on the value of investable income available, their risk appetite and the return on investment being offered.
In this blog, we shall focus on investments in the Real Estate sector. There are multiple investment options within the Real Estate sector that investors should be familiar with, namely Commercial, Residential, Raw Land, New Construction, Crowdfunding Platforms and REITs. If obtaining a secondary source of income from rent is the main aim of an investor, the question arises – which type of real estate investment is more beneficial? Residential or commercial. If budget is not a constraint and generating higher rent for the long term is the goal, commercial property is a better and more stable investment choice since it offers a higher rent with a longer lease duration and higher capital appreciation over time.
Pre-Leased Commercial Real Estate
Pre-Leased properties are those that are already rented out at the time of sale, guaranteeing a steady source of income from day 1. These properties are fully furnished and already in operation. Hence, the investor does not have to wait for possession or find a tenant upon possession. Both these problems are already taken care of in a pre-leased commercial property.
Why should you choose Pre-Leased Investment?
Pre-Leased commercial property is one of the lowest risk investment choice available in the market that allows the investor to begin making money right away, thus making it a better option for investment. One should however be careful of the prevailing market rate and market rent before buying any property.
Benefits of investing in a Pre-Leased Commercial Property.
- Inflation Hedge: In pre-leased properties, the returns are generally higher as compared to Fixed Deposits/Bonds/Residential leased properties. This helps in beating inflation.
- Rental Escalation: in any pre-leased property, there is a clause for rental escalation from 10-15% every 3 to 5 years thus making sure that the returns are also increasing with inflation.
- Higher Capital Appreciation: Capital appreciation of pre-leased properties are generally higher than vacant units. Since tenants are already occupying the properties in pre-leased investments, there is a guarantee of steady income which in turn leads to higher capital appreciation.
- Higher Liquidity: Pre-leased properties are easier to liquidate as opposed to vacant units.
- Loan Rental Discounting: It is easier to get loans at a discounted rate when investing in pre-leased properties.
