World conditions can change the market drastically in just a few hours, so investors are always looking for ways to protect their portfolios from volatility. Many do that by adding commercial real estate assets to their portfolios.
Commercial real estate offers a much better return on investment than traditionally safe options like treasuries. Also, investors can maximize their benefits by working with firms like NRIA that specialize in managing every phase of the acquisition and development of townhomes, multifamily properties, and condominiums. A team of experts handles transactions while investors enjoy a variety of unique benefits.
1.) Real Estate Yields Are Excellent
Commercial real estate investments are usually secured by leases that provide a continuous income stream, which is much higher than average stock dividend yields. As a result, investors have more spendable cash.
2.) Asset Appreciation Is Exceptional
Commercial real estate investments have traditionally provided exceptional appreciation that almost always meets or exceeds most other investment types. The value of properties can increase because of internal factors like proactive management. For example, managers typically make improvements that are cost-effective and improve the property’s desirability and usability. Exterior factors like supply and demand imbalances can also boost appreciation.
3.) Investors Magnify Their Equity
Investors in commercial real estate also can place debt on an asset that is many times original equity. As a result, they need less money to buy more assets. That magnifies equity as loans are being paid down.
4.) Cash Flow Can Be Multiplied
Commercial real estate investment makes it possible to place positive leverage on an asset. Basically, investors multiply spendable cash because they are borrowing money at a lower cost than the investment returns. The principle sounds complicated but is relatively simple. For instance, a person might loan a friend $10 and request an $11 payback. If the friend then lends the $10 to another person and asks for a $12 payback, they earned $1 on the transaction. That is the principle of positive leverage.
5.) Investments Provide an Inflation Hedge
According to professionals speaking for Global Real Estate Strategies for TIAA-CREF, commercial real estate investments offer the highest correlation to inflation when compared to asset classes like corporate bonds, the S&P 500, and 10-year treasuries. In a time when Asia, Europe, and the U.S. continue to print out the money to spur economic growth, real estate offers a hedge against inflation. The value of real estate investments like multi-tenant assets, usually rises along with inflation.
6.) Property Is a Secure Investment
One of the best reasons to invest in any type of real estate is its intrinsic value. Both properties and the land they are built on have value. When managers choose assets and locations wisely, investors can rest easy knowing they will make money regardless of who occupies their properties. That is one reason that commercial real estate is much less volatile than the stock market.
Investing in commercial real estate can provide a hedge against inflation. Commercial real estate offers high yields and excellent appreciation. Investors can multiply their cash flow and magnify equity. They also enjoy the security of knowing that real estate has intrinsic value no matter what is happening in the markets.