Commercial real estate may deliver the appreciation and stable returns most investors are looking for, even during economic uncertainty. The volume of capital invested in commercial real estate further demonstrates its proven worth as an asset. It also may offer investors a more diversified, balanced, and scalable approach to real estate investing. Whether you’re considering investing in an apartment complex, office space, light industrial, or a self-storage facility, here are three reasons you may want to consider adding commercial real estate to your portfolio.
1. Cash Flow
Commercial real estate can be risky, and with “greater risk comes greater reward.” Compared to typical returns from residential investments, cash flow and appreciation are far more attractive in commercial real estate. Commercial real estate investments may potentially offer regular income that can be higher than typical yields on dividend stocks and bonds. Stable income can provide protection and diversification against the volatility of the financial markets, and commercial real estate historically does not move in sync with stocks and bonds.
2. Longer Leases
Commercial leases can be 3, 5, or 10+ years. As an investor, a commercial property may give you lower turnover costs and vacancy rates. These long lease terms give you more reliable passive income and less of a headache by not having to market a property from year to year. Sure, it’s also possible that you could end up with less than desirable tenants for extended periods of time. Still, if you properly vet your incoming tenants with lease applications, financials, and background checks, you can avoid these long-term issues.
3. Inflation Hedge
For investors worried about how inflation will affect their portfolios, direct investment in commercial real estate can be a great hedge against the effects of inflation. As the economy grows and more is charged for goods and services, landowners may increase their rent. Growth in the economy means that people earn more money to pay more for rent.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors with hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.