Commercial real estate properties offer great investment alternatives to other types of investments, such as holding stocks, bonds, and securities. The distinctive difference is in the foreseeable returns to each kind of investment. They form part of low-risk investments that yield consistent high returns over a long time. Unlike high risks investments, investors can predict a higher future value in future sale deals. In fast-growing economies, investors have shown an increased appetite for real estate investments. Real estate investments are either residential or commercial.
Both provide a fair amount of stability but differ in returns. Commercial real estate considers that buyers of such property use the asset to perform income-generating activities that earn them significantly higher incomes that, in turn, help offset rental costs. On the other hand, residential real estate considers individuals looking for living spaces and whose income supports rental fees. Whichever the case, when deciding to invest in real estate, it is of paramount importance to assess the current and projected future value of the property and its fit into your investment portfolio.
A commercial real estate appraisal offers a great tool to assess your investments. For instance, an assessment comes in handy to ascertain how much you should be willing to pay for a real estate property in the current market and further identify the maximum amount of capital you should invest in to generate additional value to the real estate asset. There are different methods of conducting commercial real estate valuations. These methods consider the land cost, cost to build a new property, depreciation, income-generating capability, among others. Commercial real estate may include retail buildings, office buildings, warehouses, industrial complexes, or mixed-use properties with retail spaces, apartments, and offices.
The main justifications why one should consider investing in real estate are the income potential, type of clientele, reduced maintenance costs, and fewer lease regulations. Commercial real estate generates an annual return on investment of between 6% and 12%, while residential properties attract on average 4%. The type of occupants are mainly businesses who make general improvements in the building, which may cause the market value to rise. The duration of time spent by business employees on the property is less than residential properties hence lower maintenance costs, and commercial leases are less cumbersome than residential.