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Why Commercial Real Estate Is A Good Investment Winston Rowe And Associates
There are many ways to invest. Once of the most proven way of obtaining high returns has been through commercial real estate.
By: Winston Rowe and Associates
One of the hallmarks of commercial real estate is that they are income producing. Unlike most stocks, which pay no dividends, commercial real estate is defined by its ability to pay out regular cash distributions.
This is an extremely important trait, as it allows the investor the ability to have greater patience through recessions – since they don't rely on the sale of the asset for income – as well as give greater security in covering problems that may come up along the way.
The ability to create massive wealth through capital appreciation is an even bigger part of commercial real estate than cash flow. It is not uncommon for commercial properties to increase significantly in value of time. In fact, commercial real estate has proven to be one of the greatest hedges to inflation of all investment types.
One of the reasons is that rents increase with inflation, and commercial real estate's value is built upon those rents. If the rents double, then the value of the property doubles – it's that simple. Inflation also drives up the cost to build new properties, so the values of existing real estate go up to match those new values.
This is one of the most important reasons that real estate has proven to be such an outstanding investment type over time. Most commercial real estate is not purchased with 100% cash, but rather with maybe 20% to 30% cash down, and the rest is paid with a mortgage. This ability to buy assets that exceed your immediate cash available allows you to build wealth rapidly.
Most commercial real estate is based on pretty basic needs, such as shelter (apartments and mobile home parks), basic services (retail and office), and storage (self-storage and industrial warehouse). While stocks often revolve around fairly complex business models that are often built on luxuries, commercial real estate is based on strong, perpetual demand.
Most commercial properties have multiple tenants. This gives the owner some portfolio balance and diversity – they are not 100% reliant on just one tenant's rent.
This article is published by Winston Rowe and Associates. Check them out online at http://www.winstonrowe.com