Buying Commercial Real Estate is Secure Investment
In the real estate businesses as in all other businesses, the secret of making money is to attain profits through low costs and high bidders. Given the volatility of the stock markets and uncertainties of governmental policies, real estate investment is believed to be very lucrative. When carried out correctly and prudently, value investing isn't only profitable but is attached with low level risk.
Buying commercial real estate could be secure and profitable investment if you take some time to do research, go and consult with experts and will know your risks and benefits.
"There're 4 major reasons to investment in real estate: cash flow, appreciation, depreciation and principal pay-down," tells Mike McCaffery, Investment Property Consultant, GFS Commercial, division of the Guiltinan Group Real Estate Specialists.
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uying commercial real estate could be the best way to diversify your portfolio, create tax benefits and build wealth. But buying commercial real estate could be risky business, especially these days when lots of people are getting into real estate without completely understanding the industry.
"There're different kinds of investors. There're many people who're very wealthy and they will buy trophy properties for example and the returns are very small, but they hold them in as they want to have a long term hold. Many of other investors want the cash flow so they are going to go to different areas that have a higher cash flow or higher return but it isn't going to be in the greatest areas because it would be insecure," tells Investment Property Consultant Eric Warfield with GFS Commercial.
Use industry experts
Whether you are at the beginning stages of looking for commercial properties or you have closed escrow and already have your tenants in the property, it is best to get advice and seek the help of industry experts such as commercial agents and property management firms, to guide you through the process.
"If you are smart and you hire a good management company and you let them do what they do best, you might get a little less of a return, a little less cash flow. But you are still going to get all the other benefits [of owning commercial real estate] but you o know that your risk isn't as high as it would be too if you tried to manage something that you did not know anything about," tells McCaffery.
Leverage when buying commercial
Another thing that's really important, especially in commercial real estate, is leveraging. Warfield uses this example to tell us the risk: "1 investor may buy a building that only has 1 tenant in it as opposed to buying, for eg. A shopping center that may have 15 or 20 tenants in it."
That, of course is secure unless the tenant is a big name company.
"You can buy single tenant that is tell a McDonald's or a Burger King, a national tenant on a long term lease, that is a corporate signature, even if walked away from that location is going to keep paying you even if the building is vacant," tells McCaffery.
"But it is a other story if it isn't a national tenant and there is only one tenant in the building, if that person goes you are completely upside down," tells Warfield.
As with any investment, commercial real estate requires due diligence so that you end up in the best possible financial scenario.
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