Is Commercial Real Estate Investment a Good Idea?

Is Commercial Real Estate a Good Investment

Anyone hoping to begin commercial real estate investment doesn’t have to look very far for opportunities. You have your stocks and bonds. You can invest in commodities. Precious metals are yet another option. But for many of the investors we work with, commercial real estate is the way to go.

Real estate, in general, has historically been a sound investment for a variety of reasons. Commercial real estate is preferred by some investors because it is associated with a lower long-term risk. The flip side is that commercial properties tend to make more money the longer you hold them. For all intents and purposes, investing in commercial real estate is a long-term proposition.

Property Tends to Appreciate

As a hard money lender, we understand the value of appreciation. When an asset appreciates, its value increases separate from current supply and demand. The good thing about commercial real estate is that it tends to appreciate over time. Just through the natural course of economic growth, property values go up. You don’t get anywhere near the same appreciation with other types of investments.

It Generates Monthly Income

Commercial real estate investment offers the benefit of generating monthly income through leases. Once an investment is completely paid for, any revenues that do not go into maintaining the property become pure profit. This means that a portfolio of leased properties can return a steady monthly income for as long as they are owned.

There Will Always Be Demand

Investors always need to be cognizant of supply and demand when looking at new investment vehicles. Commercial real estate investment has an advantage over other types of opportunities in that property will always be in demand. As long as human beings are alive and doing business, commercial real estate will have value.

Granted, supply and demand fluctuate with economic conditions. Also, certain types of commercial properties do very well in a given area while others do not. But in a broad sense, the demand for commercial property remains fairly constant.

Property Is Less Subject to Volatility

The fact that commercial property will always be in demand limits its volatility to some degree. As you already know, volatility is the name of the game in the securities market. Volatility is also a big issue in precious metals and cryptocurrency. In commercial real estate, volatility is not so much of a problem.

This is not to say that property prices don’t fluctuate. They do. But remember that property investing is a long-term proposition. To really make good money at it, you need to hold a property for at least five years. Over that period of time, each of your properties will be less subject to volatility. Over that amount of time, stability will prevail.

You Can Finance Your Investments

Commercial real estate tends to be a good investment because you can finance a good portion of it. With a good hard money lender by your side, you don’t have to pay 100% cash on every property. You combine your down payment with lender financing to get a deal done.

Every property you pay off can be leveraged to finance new investments. As your portfolio grows, you have more financial power behind you. You grow your real estate investment income as you continue to finance new properties, creating a cash-generating cycle over time.

No investment is perfect. No investment is without its risks. But historically, commercial real estate has been very solid. It tends to offer stable returns thanks to ongoing demand, less volatility, and solid appreciation. You can also finance your investments, which is what we do here at Actium Partners.