A well-chosen and wisely planned commercial real estate investment could serve as an asset that acts as a great addition to your portfolio.There are several fundamental indicators that need to be taken into consideration as you evaluate the viability of such investments.
Commercial real estate investments turn out to be rewarding in the long run, both in personal as well as financial aspects. The reasons of investing differ from person to person. While a lot of investors invest for future wealth and security, others invest for tax benefits and investment portfolio diversification.
The hallmark benefit of making an investment in a commercial property of any kind is a is a higher potential income. Generally speaking, commercial properties usually facilitate higher ROI. Commercial real estate investing offers an array of opportunities and advantages to the investors that other investment strategies do not. Once the benefits of commercial real estate investing are recognized, the next step is to dive in.
Income from commercial properties include two avenues- rent and capital appreciation. Both are dependent on location. Every decision to invest, no matter what kind of consumers the investors are, is largely dependent on location.
Even if two buildings are in the same location, the building having better quality will get rented or sold first. Look for buildings that have better infrastructure, well-executed layouts, higher ceiling heights and better views. Properties that have a better quality are always easy to sell
Demand Vs Supply are one of the basic things to be considered when analyzing a property. Each city has popular micro-markets which have available stock and upcoming supply. If the annual supply in a period of 2-3 years exceeds the demand, rents as well as rates would come down.High supply increment that is disproportionate will affect both new and old buildings. Hence a balanced demand vs supply study is advisable.
As an investor, one should always ask about the quality and the type of fitouts done in the property. A tenant who has done his own fitouts is likely to stay longer in order to sufficiently recover fit out costs.
While analysing an investment, the investor has to understand how the lease is structured and what are the kind of risks involved. Longer lock-in periods are always a better option for the investors.
Director - Pramukh Group
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