Real estate has always been a highly lucrative investment avenue. However, with the constant changes in marketplaces, trends, and in the industry as a whole, the way we invest too has to undergo change. Real estate investments are a great way of not only creating wealth but also adding to your asset portfolio. However, one thing that you should consider here is that the asset class in real estate will also differ based on the use of the property, whether it is residential, commercial, retail or hospitality. Till now, the most favoured asset class in real estate has been residential for investors seeing as buyers have the option to either use the property themselves or to put it up for rent and earn a handsome income through it. However, today, the winds of change are incumbent as commercial real estate has proved to be the one with the highest returns for investors.
Investing in Commercial Real Estate
When you put your money into commercial real estate, it gives you the chance to access an entirely new customer base to further develop your business interests. Very different from traditional real estate investments, this is a decision that requires additional considerations. For example, patience reaps rewards when it comes to commercial real estate as the investment cycle is typically longer. It is also important for the investor to be aware of the on-going trends in the market and in the economy. As an investor, you also need to be vigilant about emerging markets that are created as a result of infrastructural developments at commercial hubs. For example, finding an office space for sale in Gurgaon would be much easier and much more lucrative than at other locations. Then you would have to look at the marketability of the property; establishments that encourage ‘green living’ and are sustainable will always be more attractive.
Why Commercial Properties are a Good Investment
While it is true that investing in an office space for sale in Gurgaon or at another location will require a lot more vigilance and research as compared to other traditional real estate investments, but the effort is all worth it as commercial investments also yield more in terms of returns.
Some of the reasons why commercial properties will become a great investment for you have been discussed below:
Talking about diversity does not refer to the diversity of the assets in your investment portfolio. The first and foremost thing that you should know is that when you invest in a commercial office space for sale you will be able to have multiple tenants that will bring in diversity to how your income from the property comes in. This will give balance to your portfolio and will help ensure that you are not a hundred per cent dependant on the rent of a single tenant.
For example, if you have a commercial space with about a hundred offices, if one tenant was to leave, it will not cause major upheaval to the overall finances. However, when it comes to a single residential property or other investments like stocks or bonds, you will be 100% tied to one single business. If that doesn’t work, your return on investment will be adversely affected.
Investing in real estate is always a major decision and involves quite a large amount of capital. From the point of view of your investment, there is no doubt that commercial real estate is the safest avenue for you to invest in. This is because a commercial establishment deals with some of the most basic needs and services (retail and office spaces). On the other hand, investments like stocks revolve around some complex business models that are generally built on luxuries. Commercial real estate is an avenue that is built on strong and perpetual demand.
Commercial real estate is a sector that is money-oriented. This means that you would not have to put in a lot of efforts to be able to earn a good amount of money. With investments like stocks, there are no dividends to look forward to and on the other hand, there is commercial real estate that is well-known for its ability to pay out a regular income to investors.This peculiarity of commercial real estate is exceptionally important as it ensures that investors are able to practice greater patience even during recessions. This is based on the fact that the investor does not have to rely on the sale of their asset for their income. It also affords them greater security when it comes to covering other problems that may spring up along the way.With investments like gold or stocks, the only way you will be able to realise and income will be when you sell them. With commercial real estate, your income is based on the cash-flow from the property, regardless of sales. It is also a fact that commercial real estate is known for having the highest returns for all forms of investment.
- Capital Rise
An even bigger part than the cash flow generated by commercial real estate is its ability to help you create significant wealth through capital appreciation. It is a well-known trend that has been observed over the years that commercial properties tend to significantly increase in value over time. In fact, over the years it has been proven that of all investment types, commercial real estate is one of the best hedges against inflation. One of the reasons behind this is that the rent of commercial office space for sale will increase with inflation and it is upon the cumulative of these rents that the value of the commercial real estate is built. Another reason is that inflation also leads to a rise in the cost of building new properties, which results in existing real estate rates also going up in order to match those new values.
Leverage is one of the most important reasons behind why real estate has proved to be such an outstanding avenue for investment over the years. The fact is that most commercial real estate is not purchased with 100% cash as approximately 20-30% of the cost is paid and the rest is in the form of loans. When you are able to buy assets that are worth much more than the immediate cash you have available, it allows you to build your wealth rapidly. Most banks in the country are also very comfortable when it comes to the value of the commercial real estate. Then again, there is the fact that the overall value of the commercial real estate is very ‘rational’ seeing that it is based on stable rents. On the other hand, investments like mutual funds or stocks are more often than not irrational and can have great fluctuations in their value.With the leverage of a commercial real estate investment to assuage banks and lenders, you have a greater opportunity to create much greater gains than you would have been able to with any other investment. Historically,commercial real estate has always been a very profitable form in the real estate sector. With a history of success, providing higher returns, and offering greater security, it may be said that there is no other investment class that is as attractive as commercial real estate.