Property investments such as, residential and commercial have proven to be profitable investments. However, if you are a property investor who is willing to undertake a large venture, then commercial real estate investing may be a better option for you. Below are the benefits of investing in commercial property:
Easier to Obtain Large Sum of Capital
First thing first, you will need a large sum of capital to start investing in commercial properties. When it comes to investing in residential real estate, property investors can only obtain money from individual investors such as hard money lenders and private money lenders as well as traditional methods of financing. There are not many other ways for residential property investors to receive even a small amount of capital, aside from those financing options.
In contrast, obtaining a large sum of capital in commercial real estate investing is much easier as there are many financing options to choose from. As a commercial real estate investor you have the ability to raise capital by using traditional financing options. You can use the help of hedge funds, investment groups, and private equity firms.
Higher Return on Investment
As opposed to residential properties, commercial real estate investing can provide a higher guaranteed return on investment, depending on the investment property of course. The average ROI for commercial properties ranges between 6-12%, while the average ROI for residential properties is typically between 1-4%. An example of a residential property would be a single-family home. This results in commercial real estate investing giving property investors the ability to make more money each year. This will have a positive effect on your overall net worth.
Forced Appreciation
Commercial real estate properties appreciate in value relatively quickly, unlike residential investment properties which take a little longer.
Investment properties in commercial real estate are value based on the revenue and cash flow that they generate. For example, the value of your commercial real estate property that has generated a lot of revenue will most likely be high as well. The results is, commercial property investors can force appreciation on their investment properties by finding ways to produce more revenue! This can be done by finding high- tenants, raising the rent, adding amenities, and ensuring the investment property is being used for the highest and best use. These are some of the best ways a savvy commercial property investor can force appreciation and increase revenue.