More and more people are today choosing real estate as a mode of investment. There are many different ways of earning profits from real estate. While fixing and flipping and buying rental income properties are popular among some investors, it is investment in commercial real estate that is gaining popularity among majority of investors. CRE investment is different from residential real estate investment in the sense that there are dozens of accommodation or commercial units in a single complex in this investment strategy.
You can hope to earn income in two different ways if you are planning to invest in CRE. You can lease out the property at a price that covers the cost of ownership and also generates monthly income in the form of rent. You also earn profit when you finally decide to sell your property as prices appreciate considerably in a short time period. Commercial real estate has produced rich dividends for the investors if they know how to manage such a property.
If you have invested in an apartment complex, you will have individuals and families as your tenants. On the other hand, businesses lease spaces in commercial property. They pay large amounts as security despots and then they also pay monthly rents. Terms and conditions as well as duration of such leases are different and so are the deposits and rants. Regardless of the type of property you are planning to invest in, it is important for you to do your homework in advance so that your objectives of cash flow and rental income are met.
Returns from commercial real estate investment also include gains from appreciation of property prices. Though prices of commercial properties mostly increase, they may lose value in some cases. Depreciation takes place only when there is an economic downturn in the region or the housing market. If market conditions are good, appreciation depends upon how well the property has been maintained and managed. If you can add value to your commercial property by undertaking periodic renovations, you can increase the rate of appreciation and reap the rewards when you finally resell the property. However, value-add approach may not produce sufficient cash flow for you as you reinvest the income to carry out repairs and renovations. But you are rewarded well when you finally decide to sell your commercial property.
Rate of returns in commercial real estate investment strategy are highly dependent upon demand and supply. If commercial property, which includes retail shops and offices, is scarce, you can expect high return on investment. However, if the location in Columbus where there are open spaces and commercial property comes up after your purchase, you may suffer from low vacancy rates resulting in decreased income. In locations where tenants have limited choices to move out, your commercial real estate investment may turn out to be like gold.
In the end, it would be correct to say that investment in commercial real estate can be very profitable if you do your research before buying a property.