Profit From Commercial Real Estate Investments
Property investors have now turned their attention towards the lucrative deals presented by the commercial properties. This sudden interest is the result of the option to diversify your property investment portfolio, along with a high income and tax breaks. However, it is advisable to conduct a research before taking the plunge.
Commercial properties include hotels, malls, medical centers, retail stores, business and industrial property. These are operated for a profit from rental income or capital gain. Some common commercial property types are:
– Apartments and multi family units: These are the first choice of investors. Apartment financing and management is very similar to that of residential properties.
– Mobile home parks: These can be a profitable investment option especially if you own the land and sell the mobile homes.
– Retail properties: More than one tenant occupies the premises and it is utilized for retail transactions.
– Offices: This category includes suburban garden offices, suburban high-rise offices, medical offices and central business district offices.
– Mixed use properties: These properties are a combination of all the above property types.
– Health care units: They include assisted living centers and congregate care centers and nursing homes.
– Hotels: The properties are categorized as either limited service or full service.
– Industrial premises: These properties can be used solely for industrial purposes.
– Self-storage units: The consumers use them for personal storage or for lease.
– Other specialties: These include oil change facilities and gas stations.
According to a reputed New York based real estate research firm, the price of apartment complexes rose by 26%, retail properties by 14%, industrial properties by 21% and office buildings by 6%, in 2004. Commercial property investment is very profitable but it is a complex business, as compared to investment in residential properties. There are number of factors that affect the property evaluation of commercial premises. It pays to study the market and tread cautiously.
Boom in commercial real estate property:
Commercial real estate includes, but is not limited to, properties used for educational, medical, commercial or industrial purpose. The properties are usable in business or trade and can be sold or bought in the real estate market. The improvement in the economy and growth in business ventures are responsible for the revival of commercial real estate. Another important reason has been the continuous flow of new investment capital. This capital is sourced from people who seek higher returns from large investments. The areas that come under the category of ‘commercially profitable’ carry a higher evaluation, as compared to other properties in developing areas. The rates for commercial real estate properties are calculated differently from the method adopted for residential properties.
The rental yields are better for commercial properties and the monthly cash flow is more than that of residential property investment, in the same area. The quoted expectation of returns depends on the kind of business that would be transacted on the premises. The profit from commercial real estate investments is definitely much higher than profit generated from investments in residential properties. Investment in commercial real estate is as lucrative as investments in stocks and bonds.