A Preferred Choice for Investors
Simplest way to invest in real estate is to buy an asset or lease it for the long term and then rent it out to tenants–residential or commercial ones. Residential and Commercial real estate are two main investment options that one thinks of when choosing to invest in real estate. Real estate is beneficial as a form of investment but it is essential to understand what one requires.
According to Statista, it has been estimated that the market size of real estate in India will be around $650 Billion by 2025. Assets such as commercial real estate and retail real estate contribute significantly in these numbers.
Commercial Real Estates are assets wherein investors put their money in office spaces or spaces that indulge in business-related activities, in exchange for high returns and a guaranteed income. Factors such as stable returns, tax benefits and ownership of property, adds to the popularity of a commercial space situated at a prime location.Commercial properties that are pre leased also are a good option as they come with a guarantee of steady income since the very first day of investment.
Commercial Estates also help improve professional relationships. Owners of commercial properties are usually not individuals, but LLCs, and operate the property as a business. As such, the landlord and tenant have more of a business-to-business customer relationship, which helps keep interactions professional and courteous.
There are several types of commercial properties that investors usually invest in-
- Office Spaces: Office Real Estates are in demand due to its multi-tenant capacity. Based on the location and style, it has potential to attract multiple tenants. It usually is not a difficult task to find tenants for office spaces.
- Multifamily: Such real estates are residential properties with more than one residential unit. It is easiest to convert to commercial units as you can rent out the units. The most significant advantage of investing in multifamily units is the multiple sources of income from the families that occupy the residential units.
- Industrial: Industrial Real Estate has taken off really well since the last economic cycle and is relatively easy to enter into for the investors due to low entry cost and flexibility. Industrial spaces are those that accommodate industrial activities such as production and manufacturing units for business.
- Retail: Such real estate house businesses that sell products and services directly to customers. They are centrally located at the heart of the town for a larger access.
- Hospitality: These real estates mainly consist of Hotels, Resorts, Amusement Parks and more.
Even when there are vacancies, wherein a few tenants leave, the investor is not left without an inflow of cash, i.e. there always is an inflow of cash which is one of the biggest advantages of Commercial Properties.
A few benefits of investing in Commercial Real Estate is:
- Equity is the amount of value an investor has built up over a period of time. With commercial real estate, the investor can build equity quickly, with the steady and relatively high returns that commercial properties yield. They can also see significant benefits as the property appreciates in value.
- Commercial real estate is that type of real estate that has a solid intrinsic value. Both the land and the structure have a value that makes a commercial property a hard asset. Buying a commercial property in the right location will keep investors safe from loss of cash inflow even during times they don’t have tenants occupying their properties.
- Investors that choose commercial real estate benefit from longer leases, lower vacancy rates, and higher income possibilities than those who choose other types of real estate. Compared to stocks and bonds, commercial realty is less susceptible to market stocks and risks.
- Commercial Real Estate can also be beneficial in hedging against inflation as property prices and rental rates mostly go hand-in-hand.
