Commercial real estate is undeniably one of the emerging markets of this millennium. A commercial real estate is any property owned to produce an income. In the United States, about $6 trillion worth of commercial real estate comes from the investments on malls, shopping centers, hotels, and office buildings.
However, just like any other industry, this market has its own pros and cons. The rewards and risks of investing in a commercial real estate are things that you should consider before plunging into such.
To give you an overview, here are some things to consider when it comes to commercial real estate investment:
PROS
One of the best things about investing in a commercial real estate is that it does not require any PhD or even a Bachelor’s degree for you to be successful. You just have to be willing to learn things by yourself and be diligent on learning from the experiences of the professionals in the field.
Next on the list will be the wide range of investment opportunities that can come in – from duplexes up to multi-dwelling units and even malls or shopping centers. Thus, being engaged in these kinds of bigger investments will provide you with more profits and more investment possibilities. Another good thing about investing in a commercial real estate is the long term appreciation value. This means that your investments will possibly increase its value over time and will give you more profit in a longer time span.
The commercial real estate market is not as unstable as other markets, so it is more unsusceptible to the moderate ups and downs extremities of the securities investments. Hence, it offers great opportunity for good ROI (return on investment).
You can also invest even with a little of your capital and get into the market by means of your ability to take advantage on using a leverage. It is the use of other people’s money (OPM) to suffice the financing of your investments in the commercial real estate.
CONS
Amidst the enticing pros of investing in the commercial real estate are various risks that can somehow affect your financials if ignored. Always remember that it is your priority to increase your profits over time so being objective on forging deals is really advisable.
Even though you don’t need a relative course or degree to penetrate this market, it is still advisable for you to equip yourself on the fundamentals of the market behavior, investment dos and don’ts, and even the basics of managing your properties. As much as possible, you don’t want to be like a goldfish swimming in a pool of sharks. Learn little by little through starting up with micro investments. Having a mentor or someone who can train you for the field is also ideal to keep you ready on the challenges you will encounter. Join a firm who can further educate you on investing in a commercial real estate.
The ongoing expenses and its maintenance is also a bit of a concern on commercial real estate investment. Although it’s easy to enter the market with a proof of capital, you must know that these properties cannot be sold easily in a short period of time. You must be able to sustain the expenses (e.g. power and water supply, manpower) of your property until it is sold. That is why having reserved funds is also a must. This will also protect you from economic downturns when it happen.
Knowing several matters about investing in a commercial real estate is a must. Nobody goes to war without preparation. If you are currently having troubles on assessing the value of your properties, turn to the property valuation and appraisal experts of Aviso. Because here in Aviso, WE VALUE BEYOND MEASURE.
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For more real estate investment, property valuation, and appraisal articles, visit our blog pages. Aviso will always be your one-stop valuation and advisory buddy.
Reference: thebalance.com
