We, all work hard for our money but as the old cliché goes “Is our money working hard for us?” An investment is an asset or item acquired with the objective of generating revenue or appreciation or both. Whichever avenue you decide to invest your money, there’s one thing that should be at the forefront of your decision-making and that’s risk. There’s always a purpose behind financial investments. What’s yours? Whatever your reason, sustainable and continuous investment in real estate may hold the answer.
Buying and owning real estate is an investment strategy that can be both satisfying and lucrative. Unlike stock and bond investors, prospective real estate owners can use leverage to buy a property by paying a portion of the total cost up front and then paying off the balance, plus interest, over time. Over the last two centuries, about 90% of the world’s millionaires have made their money by investing in real estate.
For an investor, a right strategy with an experienced guide can be highly beneficial. The guide can help them take care of three major points of investing, in my order of importance
- Safety of Investment,
- Future appreciation possibilities,
- And lastly: Returns VS Investment.
Many investors get caught in the web of higher returns on investment, end up buying B grade located properties, which have low potential of appreciation and regret in the long run. My suggestion to all my clients is, to buy premium properties, keeping fair value and if there is an existing tenant, add premium for the tenant and never look at the returns, which can be on the slightly lower side. The advantage is even if the tenant vacates the property, there are always takers for such premium properties.
What Is Commercial Real Estate and why invest in it?
Commercial real estate (CRE),is property used exclusively for business purposes. Most often, commercial real estate is leased to tenants. This category of real estate ranges from office space to retail space.
There are many reasons to explore CRE, for example, looking to save more for retirement or giving your children a better education, or simply want of diversification of investment portfolio.
Unlike residential assets, commercial assets are witnessing stable & increasing demand and prices, say a range of reports. CRE also benefits from comparably longer lease contracts with tenants than residential. This long lease length gives the CRE holder a considerable amount of cash flow stability, which can be used for various purposes like paying off any loans on the property, personal expenses or further investing. Residential properties should never be treated as investments and should solely be made for the purpose of personal use and mental satisfaction and stability.
Income potential: The best reason to invest in commercial over residential rentals (2 to 3%) is the earning potential. Commercial properties within the city limits generally have an annual return between 5% and 8%, depending on the type of property. The best rentals available in this sector are from the warehousing, which gives returns between 8 to 11%, however the investments in this sector are higher. Another favourable reasons is that loans against property interest rates are at all time low.
Rented properties can make available regular income while maximizing accessible capital through leverage. Moreover, many associated expenses are tax-deductible, and any losses can offset gains in other investments. ?In ideal situations, properties appreciate over the course of their mortgages, leaving landlords with a more valuable asset than they started off with.
Income is created when you work; Wealth is created when your money works for you. You will only become rich when you make money while you sleep and income is generated in the form of “monthly rental”.
As with any and all forms of investing, it is best to get started early on with real estate investment. Start today!!
Pankaj Roshan
The author with 32 years’ experience, is a leading Real estate Broker/Consultant, and can be reached on roshan@roshanrealestate.in .
