Commercial Investment Property

| November 5, 2011

Real estate is one of the best ways to build wealth and establish financial security. With real estate you are able to acquire an asset that increases in value over time and enables you to develop a substantial fortune in the process. Investing in real estate is among the best ways to build a portfolio for retirement and future financial security. This has many benefits such as tax breaks, appreciation in value, and rental income as well. When buying and investing in real estate, most people buy a house or condo and live in it for many years. Over the next several years they build equity and then plan to sell it for a high profit or capital gain. In other cases people buy rental houses that they buy and then rent them out to tenants in order to generate extra cash flow. Although these types of real estate transactions are very advantageous for many, there is another form of real estate that is very beneficial is known as commercial real estate.

Commercial real estate is property that contains 100 or more units. These types of properties are usually large apartment complexes, and office buildings. When buying these types of places, this process is known as acquiring commercial investment property. Commercial investment property is either office buildings and apartment complexes that are purchased for investment purposes like rental houses and small apartment buildings.

With commercial investment property there are certain risks, advantages and disadvantages that go along with it. The advantages of commercial investment property are that the properties provide the highest equity buildup of all investment properties. Another advantage of commercial investment property is that they provide rental income that is usually enough to provide the owner a stable income that allows them to support themselves. Commercial investment property also provides the potential to enable the owner a substantial profit when selling it. The vacancy rates are also among the lowest of all investment property and a few vacancies won’t hurt the income potential of the property as much as other properties. When getting a loan, lenders focus on the property income rather than personal income when evaluating a mortgage.

The disadvantages of commercial investment property is that it is very expensive. Since commercial investment property is usually between $800,000 – $10,000,000, a prospective investor needs to have lots of money in order to get the property. Another disadvantage is the fact that with office buildings, it can be tough to fill vacancies especially during a recession and thus paying the mortgage can be a challenge.

Overall despite the disadvantages, commercial investment property is arguably the best and among the surest ways to build wealth and establish financial security. The advantages greatly outweigh the disadvantages. With commercial investment property, you get a large property with a low vacancy rate, a nice stable income and significant equity buildup and a substantial profit when selling. However, when getting a commercial investment property, you will need an extraordinary amount of money and so you may need partners in order to acquire one.

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Category: Investment

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