[fa icon="calendar"] 03.02.2017 / by David Lee
It’s not too late to invest in commercial real estate. Prices are rising and vacancies are falling fast. Many investors agree that the outlook is highly optimistic and commercial real estate investing will continue to be a stable and lucrative wealth-building machine.
Here are three reasons why investing in commercial real estate is still profitable.
The Job Market is Growing
Consistent job growth over the past few years has led to an increased demand for commercial space, which translates to lower vacancy rates and higher rent prices. It’s not just office and retail space, though. Multi-family complexes are also in high demand as more and more employees are relocating and searching for places to live.
Commercial Real Estate is Less Competitive
Most investors tend to target residential property owners, making residential the more competitive market. There aren’t any hard statistics that support this view, but think about it. You probably see way more “We Buy Houses” signs than “We Buy Office Buildings” signs. This is because most commercial properties under the $5 million mark are too large for residential investors and too small for institutional investors.
You Can “Force” Appreciation on Your Property
Commercial real estate is valued differently than residential. Residential real estate is typically valued by comparison to other properties with similar features in the same area. It doesn’t matter how much you’re getting for rent or what extra features your house has, residential property will still be valued close to other comparable properties.
Commercial real estate is different, though. It is valued based on the revenue that your property is generating. It is still subject to comparison with other properties, but the amount of revenue it produces is much more important. So in order to “force” appreciation on your property, you can simply look for new ways to increase revenue. Even a small increase can have a big effect on the value of your property.
A Sound Investment
As you can see, commercial real estate is still a profitable investment. That isn’t to say it doesn’t have its disadvantages, but it can be a great way to generate revenue through a strategic and disciplined approach to investing.