Getting started with Commercial Real Estate Investing

by Daniel Morris Content Writer

One of the best ways of building wealth is by investing money in real estate. Commercial real estate investing is something that is dependent upon cyclical changes. The commercial industry comprises of numerous sectors namely hotel, retail, office, multifamily, industrial, etc. The expectations of each sector are at the clemency of special demands & needs. Without a doubt there will be manifold variables which will manipulate the performance of this real estate sector. Investors must be extra aware about how the variables will impact the current & future trends. As per many surveys and studies, the CRE sector that tops the list right now is industrial.

Rules of investing

When it comes to commercial real estate investing, it is not that challenging as it seems. If the principles associated with long-term investing are followed in the correct manner, earning higher returns in comparison to debt instruments becomes simpler. The points that must be kept in mind during investing are:

• Location – Commercial properties offer returns via two avenues that is capital appreciation & rent. Both these elements are entirely dependent on location. The site where the vacancy is below 5% is favourable. By this, supply will be in check & tenants will also not vacate. This leads to capital appreciation & high rents. An elevated vacancy location offers tenants the options for renegotiating and moving rents.

• Demand verses supply – A savvy investor always analyses this before investing in any commercial property. Each city comprises of varied micro-markets. In Mumbai, there is BKC, in Bengaluru, there is Whitefield, etc. Every micro-market contains an upcoming supply and stock which marks the number of offices that are completed & leased. Brokers also publish annual demand regularly.

When the annual supply over upcoming two to three years surpasses the historical demand, prices and rent will automatically go down. The high supply will be lopsided that will affect old & new buildings. As tenants will receive more options in the current market, new buildings will direct low rents. Older building tenants will renegotiate escalation clauses & rents.

• Diversification – It is known that diversification decreases risk. It is especially more applicable in commercial real estate investing. When you invest all your wealth in a single property, you are vulnerable to higher risk. If by chance the tenant evacuates, not only will be the rent stop, but you will have to pay the property taxes & maintenance payments. Investing money in manifold properties all over the cities wil decrease inconsistency in income by expanding the property level dangers.

Start investing today for best gains in the future!, To know more contact, Alliance International Real Estate.