Investing in Commercial Real Estate – The Real Challenge

Investing in Commercial Real Estate - The Real ChallengeCommercial real estate presents a series of opportunities these days. Particularly concerning investments that can provide higher returns than savings accounts or even the markets. Real estate is indeed a more secure investment option than many currently out there. Even when compared to the turbulent residential real estate market the commercial real estate market is doing quite well.

If you are considering investing in commercial properties you first need to realize that the two markets are quite different. The market is different due to the differences in laws that guide buying and selling in the commercial one. For instance due diligence in commercial is different than that in the residential market and so is taxation. Some things remain the same, such as the need to conduct due diligence and surveying.

Properties that fall under the commercial class are ones that are geared to generating income. Such properties are restaurants, retail stores, office buildings, self-storage, industrial, strip malls, hotels, small multi-family units and large apartment buildings. As you can see there is a wide range of properties that fall under the commercial umbrella. If you are a new investors then it would be best to start small with a multi-family multiplex.

The benefits associated with investing in a commercial property are many. One of the main difference from its residential counterpart, commercial properties are evaluated, bought, and sold based purely on what return on investment they can generate. Think of things like a business which needs to generate a cash flow. Such investments need to generate a monthly on-going income through rent.

The most important thing to keep in mind is such commercial property investments should be considered as long-term investments. It is very common to have issues with generating cash flow in the short run. Consider it as a reality in the field.

In the long run however, cash flow will increase as long as you manage the property well or have someone else do it. It all depends on how much cash flow your property can generate, if it is a lot then it might be easier to afford management. Otherwise, you should have to factor in your time spent in managing the property when calculating your costs.

Commercial real estate investing can and most certain will be profitable in the long run. It is however a frustrating experience and in most cases a challenge to manage. Lager investments are in some cases easier to handle as you can cover the costs of outsourcing management to a professional.