Investing in Commercial Real Estate
From apartments to offices and retail space to mixed-use properties, commercial real estate exists nearly everywhere and can offer an excellent investment opportunity. Investors in commercial real estate make money by managing the daily operations of the building, as well as leasing individual units and spaces to tenants and by the potential of appreciation over time in the property's value. Below we examine the first way commercial real estate investors generate income:
Examples of Investment Properties
Earning Money through Appreciation in the Property's Value or through Value-Add Approach
Commercial properties can offer a return on investment as a result of their potential for appreciation in value over time. Conversely, commercial properties can lose value. Investors are likely to earn money if there is an increased demand for their property or a specific neighborhood, meaning tenants will pay higher rents for a desirable location and tenant mix. With increased demand, potential buyers will pay a higher price than an investor may have paid to purchase the property.
Another way investors can earn money in commercial real estate is through taking a more active "value-add" approach, making capital improvements to the property, upgrading the tenant roster by taking a proactive approach to property and asset management in order to boost its inherent value or income-earning potential.
Earning Money though the value-add approach
There are several ways an investor can earn money on a commercial real estate investment property using the value-add approach, including the following;
Pros and Cons to Investing in Commercial Real Estate
There are both pros and cons to investing in commercial real estate. While commercial properties typically offer a greater financial reward than investing in a single-family home or a residential apartment, investment involves more risks, namely, a greater time commitment, need for professional help (i.e. property management expenses), bigger initial investment, etc. Alternatively, below are several of the pros when it comes to investing in commercial real estate:
The experienced team of advisors at Verani Realty offers comprehensive and diversified services in the areas of Seller/Landlord Representation, Buyer/Tenant Representation, Investment, Marketing, Land Use Planning/Master Planning, and Development. Reach out to a commercial Advisor within our firm to help guide you through your investment property sale or purchase.
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