Investment is a good way of putting your money to work for you, as you work to earn more of it. Legendary investor Warren Buffett defined investing as “Forgoing consumption now in order to have the ability to consume more at a later date.” One can gradually add to their income by making multiple investments. As a result, it is recommended to start investing as soon as money has been set aside for it. Investing is an essential part of wealth generation. It helps set up a stable financial future.
Investment in real estate has always been profitable, and it has risen dramatically in the aftermath of the COVID-19 pandemic. On average, real estate appreciates 3% – 5% a year without you doing anything except maintaining the home. The real estate industry offers a variety of investment options, including commercial, residential, raw land, new construction, crowdfunding platforms and REIT property investment. Investors should be aware of the merits and demerits of all these options so as to make the best-suited investment decision for themselves.
Conventionally, housing or residential real estate has been the go-to option for investment. However, in the last decade, the trend has shifted and the investors have started to recognise the value of investing in commercial real estate as a return-generating asset.
Commercial real estate consists of properties that are used to generate a profit, either through capital gains or rental income. The return on investment for commercial real estate is generally higher than the return on investment for other types of property. This is because commercial real estate is typically leased out at a higher rate than residential property, resulting in more income for the investor accompanied by higher capital appreciation. These properties include office buildings, medical centres, hotels, malls etc. Demand for office space is on the rise as more and more start-ups are being formed and existing businesses are expanding, which provides a perfect opportunity to make an investment in commercial real estate.
When it comes to office spaces, they are high in demand as they provide a secondary form of income. When compared to a residential space, the most conventional form of investment, lease is much longer and higher in a commercial space. Thus, initial investments and returns are much more than the former counterpart as well. A commercial space in a prominent location is more attractive when features like reliable profits, tax advantages, and property ownership are taken into consideration.
Commercial Real Estate helps in investment diversification and reduces risk to a great extent. Compared to stocks and bonds, commercial real estate is less susceptible to market shocks and risks. Such investments also act as an inflation hedge as the property prices and rental rates mostly go hand-in-hand.
Several property types yield high-profit margins, however, due to the wide variety of options available, many investors likely find themselves wondering what really is the best investment in real estate. The best place to invest in real estate will depend on many factors such as location, appreciation, interest rates, etc. and investors should be careful not to rule out any options when searching for potential deals.