Why Should You Consider Passive Commercial Real Estate Investing?by Sharon Rousseau Personal Blogger
Summary: Knowing all that is needed about passive investing in commercial properties can help you earn profitably. It will also ensure that your investment in the right direction at the appropriate time.
Passive investing and active investing represent the two distinct sides of the investor spectrum. Perhaps even more significantly, they represent two specific approaches towards the investment landscape that opens vistas of opportunities for earning well. Through passive commercial real estate investing, it will obtain passive income and appreciation from the properties and the tax benefits, stronger buying powers, and lots more.
What is passive income investment?
Passive income generally refers to a somewhat automated income stream. Passive income comprises regular earnings from a source other than an employer or contractor. It can come from two distinct sources: rental property or a business in which one does not participate actively, such as stock dividends or being paid book royalties.
You can make a passive commercial real estate investing in Arizona or an upfront capital investment in a stock or mutual fund and then receive an ownership stake in that investment, from which you are paid dividends or other types of regular income. The aspect that makes this form of income passive is that you are not managing the investment directly.
Investing in commercial real estate for passive earnings
Despite fluctuations over the recent years, real estate still today persists as the most preferred choice for investors looking to garner long-term returns. The investors can easily acquire a property for a 20% down payment, then install reliable tenants who are commercial establishments to keep the money flowing. Commercial properties can include anything from multifamily apartment buildings to retail outlets, to medical office space to industrial warehouses. These can generate considerable returns for investors in two primary ways- income and appreciation.
Commercial real estate has more cash flow
Besides making more money proportionately, you could argue that commercial real estate has a more reliable cash flow. Tenants in commercial properties are usually businesses or commercial ventures that intend to stick around for a while, at least. They are generally punctual and better at paying their rent as it concerns their business. As an investor in passive commercial real estate investing, you can take solace in the fact that a majority of your tenants will pay their bills on time, an advantage you get over single-family rentals.
Have longer lease durations
Passive investing in the commercial real estate sector has also become synonymous with comparatively longer leases. While most single-family leases will stay for about a year or so, commercial leases tend to be much longer, keeping in mind the long term business goals. It is usual for some commercial leases to last for about five to 10 years. Passive investing in commercial real estate adds a safety level not usually seen in single-family properties. Since leases typically last longer, vacancies are less of a threat.
There is more money in commercial real estate
There’s primarily one reason for which most investors want to shift from residential real estate to commercial real estate is more money. Since the commercial buildings are often much more prominent and come with a larger price tag, commercial establishments or businesses usually opt for them. The potential to make more money on a given deal is genuine, but there’s also more risk. However, all risks can be avoided when done correctly. Anytime there’s more money at stake, investors should be cautious. This will result in a lucrative payday for savvy investors.
Created on Jan 11th 2021 07:12. Viewed 257 times.
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