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Is the retail property a good investment?

PRI
June 8, 2020

When people consider investing in property, many investors fail to consider commercial properties beyond residential income properties. If you are just considering residential income properties, then you are missing out on potentially huge opportunities. Look at the income and equity potential of investing in other types of commercial real estate and the benefits they provide! Retail property is a good investment, and here are several reasons why you should be investing in one:

1) Higher potential for income:

The annual return for commercial properties is high compared to other investments like stock dividends because of the property size and the number of tenants it can hold. The average yield stands around 2 to 3% annual return for stocks, whereas commercial properties yield around 5% to 15%. Multi-family properties or apartment buildings tend to be toward the lower end, with suburban office spaces at the higher end.

2) Leveraging increases cash flow:

Leveraging increases equity in built-in commercial real estate. Leveraging means using borrowed capital to make an investment, with an expectation where the profits will be higher than the interests to be paid. This way, you can put down a small amount of your purchase price on a specific property, finance the rest and go on to invest in more properties in the same manner. Rather than buying outright, real estate leveraging allows you to enjoy a higher return on investment. Also, commercial real estate leases are typically more attractive to banks when considering financing a property as these leases are longer and the tenants have a stronger credit. The likelihood of a more stable income flow is greater.

3) More tenants, less rick:

Commercial real estate leases are based on net taxes, net building expenses and net common area maintenance fees. This fee is levied on the tenants who are responsible for the expenses for the property. Also, a multiple occupancy building has a lesser risk of income loss compared to single-family residential properties.

4) Security advantage:

Compared to stocks, bonds, and other forms of investment, commercial real estate promises better value for the land and improvements on the land such as structures and landscaping. Also, commercial real estate property needs are relatively stable.

5) Excellent appreciation value:

Where stocks do not allow for much more than buying and selling on the market, commercial property owners are able to make improvements on the properties as long as the local government regulations and approvals are met. A commercial real estate property owner can modernise the property, control the rents, and can even apply for a zoning change. Inflation can also contribute to the value of existing properties; and while new properties will cost more to develop than older properties, existing locations still increase in value along with the developments in the neighborhood.

Conclusion:

Commercial properties come in all shapes, sizes, and purposes. It has a lot of benefits compared to other forms of investments. Are you looking to invest in commercial real estate? Consult with us at Perfect RealEstate Investments. Our years of experience can help you determine exactly which property fits you best, setting you up for years of success. Don’t go it alone — schedule your free consultation with us today.

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