Weighting Fundamentals Is Crucial For Analysis
Every city, and its surrounding metropolitan statistical area , has its own economic drivers and growth indicators. These fundamentals are tracked and documented by many sources, from U.S. government agencies such as the Census Bureau and Bureau of Labor Statistics, to real estate-focused think tanks such as the Urban Land Institute and market research firms that sell data subscriptions. Our proprietary predictive model starts with data from many of these respected industry sources.
Traditional Commercial Real Estate Investing
Income potential: The potential to earn passive income being a landlord for commercial real estate is huge much more than in residential real estate.
The triple net lease: Most commercial landlords use this type of lease. The lessee pays all of the expenses, including taxes. These leases are generally for 10 years with rent increases built right in.
Limited actual work: As the landlord for a commercial property, there is very little for you to do or maintain, especially with a triple-net lease in place. If you really have to, you can hire a property management company to take care of things you dont want to be bothered with.
Risk: All sorts of risks are involved. Being the property owner leaves you with a lot of liability for accidents on your property, as it is a public space where anything can happen. Theres also the risk of your commercial tenants not being able to pay their rent or going out of business completely. Also, commercial real estate is a highly illiquid asset. If things go bad and you need to sell quickly, chances are you wont be able to at least not at the price you want.
Foreign Investment In Us Real Estate
Foreign individuals and corporations are free to purchase residential or commercial real estate in the United States. In 2013, foreign buyers made up about 7% of transactions in the $1.2 trillion U.S. real estate market . The annual survey of the Association of Foreign Investors in Real Estate ranked San Francisco, which had been one of the top five global cities since 2011, at 11th place, and Washington, D.C., at 25th from 15th place last year. Furthermore, the survey revealed that New York City is no longer the only No. 1 city in the US that appeals to foreign investors that title is now shared with Los Angeles, which is tied with New York in this latest survey.
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Why Invest In Commercial Real Estate
For any investor who has been wondering why they should invest in commercial real estate, the answer is simple. Its a much larger scale than investing in residential real estate.
Of course, investing at all is beneficial to your future , but investing in commercial real estate can bring your portfolio and cash flow to a whole new level. Instead of 1 single-family residential property, invest in a multifamily property and have multiple tenants paying rent under 1 roof. Or, explore the many types of commercial real estate and decide whats best for your real estate business.
To succeed in the world of commercial real estate, you do need to be willing to take some risks, which can exponentially increase your cash flow and give you passive income for years to come. Commercial real estate investors should also have a mindset with long-term goals.
Your real estate assets can become your livelihood not just a hobby that happens to make a little passive income but rarely does it happen overnight. Capital appreciation happens over time, with highs and lows throughout the investment. Enjoy raking in the rental income, and after a few years if its not for you, wait it out and sell at the height of the market for optimal capital gains.
How To Determine The Best Places To Buy Commercial Real Estate
Curious about which commercial real estate markets are best for getting started? Its important to keep a few priority items in mind. Although there will always be variances, commercial markets that embody the following five criteria are known to offer the best returns for investors:
Low Unemployment Rates: Cities that have a low or decreasing unemployment rate indicate a robust job market, with a probable demand for office and retail spaces.
Low Purchase Prices: This might sound like a no-brainer, but it is important to find a property that is priced either below or at market value. If you want to profit off your renters, consider finding a slightly distressed property that is being sold for a deal. There is also the option to buy a commercial foreclosure property.
High Asking Rents: Be sure to do your due diligence before jumping into commercial real estate and research comparable markets to see what average asking rent prices are. If the asking rent rate is high, and your purchase price is low, you should make a substantial profit.
High Tenant Demand: Search for up-and-coming markets that are creating new jobs and developing new residential complexes because there will be an increased demand for space.
Low Vacancy Rates: If you have high tenant demand coupled with low vacancy rates, you will be able to charge a higher rent price, therefore increasing your profits.
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Is Now A Good Time To Invest In Commercial Real Estate
With the current unemployment rate at 23% and GDP down 38% due to the Covid pandemic and associated lockdowns, commercial real estate is taking a hit. The largest dips in demand are being felt in two sectors: office and retail spaces.
The Green Street Commercial Property Price Index found that office occupancy fell by 41 million square feet and retail occupancy fell by 13.6 million square feet in the first quarter of 2020. Hotel and hospitality spaces are also feeling the crunch.
In fact, commercial property prices and sales have been down across all commercial property types with the exception of industrial space. Occupancy in industrial establishments rose by 62 million square feet, so we are seeing an understandable shift in commercial property use.
Several years ago, repurposing commercial space became popular as retail shopping centers experienced vacancies due to increased online shopping at retailers like Amazon. The pandemic lockdowns are understandably accelerating that trend, with vacated malls near major metropolitan areas being repurposed as warehouses and logistical distribution centers.
The National Association of Realtor’s Commercial Real Estate Trends and Outlook report for October 2020 showed some staggering trends:
Types Of Commercial Real Estate
Entering the commercial real estate market as an investor can be overwhelming and confusing. The best thing investors can do is to narrow down what type of commercial real estate investment property theyd like to begin investing with. Generally commercial real estate is any investment property larger than a single-family home that is used to generate a profit. This can be in the form of capital gains or rental income from the tenant.
Investment properties can be in:
- Office buildings: central business district and suburban offices, medical offices
- Industrial buildings: manufacturing spaces, warehouses, storage facilities
- Retail: regional malls, strip malls, retail centers with anchor tenants
- Multifamily housing:apartments ranging from duplexes to high-rise buildings, including affordable housing
- Hotels: full service, boutique, extended stay
- Mixed use: a combination of commercial properties
Knowing which types of commercial real estate you would like to invest in is half the battle. Next, home in on just how involved youd like to be. Depending on the investment strategy you choose, you can be as involved or not involved in the process as youd like.
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Where To Buy Real Estate In Canada : Overview
By Zoocasa on June 28, 2021
Designed to simplify the complex task of buying a home amid a pandemic, our guide ranks the best-value neighbourhoods across the country based on the current average home price, price growth in recent years, as well neighbourhood characteristics and economics.
|2020 average price index across all residential property types
|1-year growth percentage
|Overall 3-year dollar value appreciation
|% above / below the national average
|Bancroft & Area
- Measures how affordable the neighbourhood is compared to the surrounding area and the region overall
- Measures how quickly prices are appreciating in this neighbourhood, with an emphasis on long term appreciation
For more, please see our complete methodology
Buying a home is a major financial milestone for many Canadians owning a property doesnt just provide them with shelter, but is usually the largest asset in their portfolios, too. With gains outpacing most money markets, a homeowners equity can provide capital for anything from home renovations to retirement planning.
And amid the onslaught of the global pandemic, home has become so much more than a place to live. For many, where we live has also become our office, school, gym and restaurant. Its where we have sheltered in place to prevent the spread of the COVID-19 virus, in hopes of keeping ourselves, our loved ones, and our communities, safe.
What Are Investment Vehicles
An investment vehicle is any mechanism by which a person is able to invest in a product that generates a positive return. The most common forms of investment vehicles are stocks, bonds, options and futures. There are other forms of investment vehicles, though, including commercial real estate, ETFs and REITs , each of which we describe in more detail below.
Investing in a commercial property real estate ETF can be a smart way to make your money work for you. It is ahighly liquid way to invest in new commercial construction projects, for example. When you invest your money, it should be noted that you arent investing in specific projects. Rather, you are investing in the equity of real estate companies and real estate investment trusts .
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Commercial Real Estate Return On Investment
An investor invests in CRE to achieve the highest possible rate of return on each of his investment. The higher is the return, the more is the earning and the more worth is the investment. There are 6 different ways to boost the rate of return on any CRE investment.
- Increase the rents regularly to match the inflation and also reflect the costs which are related to the property such as insurance, property taxes and utility costs.
- Add additional streams of revenue create another additional source of revenues like collecting late fees, charging rental fees for parking or garage space and so on.
- Improve the property to add value and justify an increased rent or even be helpful for getting new tenants.
- Expansion of the property and adding more units for the rents to attract such investors who target such properties with additional land with a sole objective of adding more units, buildings or rental space.
Should I Invest In Commercial Real Estate
Investment in commercial real estate is gaining popularity in the real estate segment of investment. Real estate investment has its own complexities by way of issues in liquidity, maintenance, transparency, and high prices. For anyone who wants to invest in the CRE, a thorough consideration must be given to the risk bearing capacity, the type of investment whether long term or short term, and the purpose of investment. For those who are considering stability, low risk with low returns, and buying a small space, investing in CRE is ruled out.
The potential buyers of CRE can be
- Business owners in need of new or larger premises.
- Investors who are looking forward to expanding their portfolio.
- New investors to CRE who are interested in buying into a portfolio.
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The 20 Best Cities To Own Investment Property
Here are the 20 best cities to own investment property, ranked in reverse. The increase in home values data point is a LAGGING indicator, so please dont see a huge figure as a positive sign. It simply means you missed out, but that interest is high.
The key data point I like to focus on is the rental yield. The higher it is above the risk-free rate of return , the better. The current risk-free rate of return is roughly 1.2%. It will likely stay below 2% for the next decade.
As a result, investing in real estate in the best cities through real estate crowdfunding is a wise move.
Commercial Real Estate Lets You Leverage Substantially
Real estate is usually not purchased in full but instead with a mortgage or, in most cases, a down payment. Being able to buy an asset without having to pay fully proves profitable to investors. It is advantageous as it increases their leverage, resulting in higher gains compared to other asset types.
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Should You Invest In Commercial Real Estate
What does this mean for investors? Certain sectors, such as retail, office space, and hotels, are experiencing painful uncertainty caused by an understandable drop in revenue. But there has not been a shockwave yet across all types of commercial space. As most leases are two-year or longer terms, many office buildings and commercial spaces are in a sort of plateau.
The leases havent expired, and the sentiment seems to be that things will go back to normal or near-normal when the pandemic lockdowns are eased. And while sales volume and commercial real estate prices have dipped some, theres no fire sale of existing commercial space . Nevertheless, it doesnt seem like the most opportune time to jump into commercial real estate investing right now.
So You Want to Learn About Investing?
Which Country Should You Invest In
While all of these countries are great to invest in real estate, you have to know the market youre about to dip your toes into before you fully commit.
Get up to date on historical rent and property prices, consider hiring a real estate consultant and legal freelancer so you know what youre getting into, and sink your teeth in for the long haul.
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Best Real Estate Crowdfunding Platforms
Its important to focus on the best real estate crowdfunding platforms with the most experience, most capital, and the best vetting mechanism.
1) CrowdStreet is based in Portland and connects accredited investors with a broad range of debt and equity commercial real estate investments. CrowdStreet is great because they focus primarily on 18-hour cities with lower valuations, higher net rental yields, and potentially higher growth. Crowdstreet allows investors to invest directly with the sponsor.
2) Fundrise, founded in 2012 and available for accredited investors and non-accredited investors. Ive worked with Fundrise since the beginning, and theyve consistently impressed me with their innovation. They are pioneers of the eREIT product. Most recently, they were the first ones to launch an Opportunity Fund in the real estate crowdfunding space to take advantage of new tax laws.
Both of these platforms are the oldest and largest real estate crowdfunding platforms today. They have the best marketplaces and the strongest underwriting of deals. If you want to invest in the best cities in America, Id scan the listings on CrowdStreet.
Ive personally got $810,000 invested across 18 different commercial real estate projects around the country. My current internal rate of return is about 13% since 2016. Best of all, the income is all 100% passive.
Features Of A Profitable Cre Investment
Real estate investment is a tough call to take and therefore it is very important for a foreign investor to do detailed research before taking a plunge into the investment.
Lets have a look at some of the features of a profitable CRE investment
- Location is very good for rent and capital appreciation
- A good Quality CRE attracts a premium quality of tenants.
- Demand and Supply are proportionate to each other in CRE.
- Comparison of rents between the current ongoing market rate and the rate or rent which is being demanded from the investor.
- Quality of tenants pay rent on time, also pay higher deposits, and stay for a longer period there by increasing the value of the property.
- Structure of lease with a 9 year or a 15-year lease with rise every 3 years or 5 years.
- Security Deposit for any CRE varies between 10 to 12 months of the rent
- Diversification helps. Investing in multiple properties will reduce the risk factor at the property level as well as there will be a variety in income.
- An investor need not to worry about the interiors or the furnishing of the property. It all depends upon the tenants choice, taste, and company guidelines if any.
Keeping these features in mind let us now learn how to make money in CRE.
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The Best Markets For Real Estate Investment In 2022
In ordinary times real estate investors don’t worry much about where to invest. Every local market has opportunities, every one has rental properties you can buy, every one has homes you can develop to produce income. Growth markets provide the chance to get higher returns but even stagnant markets need housing that can provide better returns than stocks or bonds.
Right now we’re not in ordinary times. The covid pandemic still threatens economic recovery, work and living patterns may be permanently altered, and a surge in home prices has disrupted our notions of what a home could be worth or what an investment property should cost.
Despite these difficulties – or rather, because of them – here is our guide using data from Local Market Monitor, Inc. for where and how investors can achieve the best returns with the lowest risk in the coming year. We will identify markets where demand for rentals should be strong but also – because most investors want to stay local – will show how to maximize your return in any local market.
The job situation tells a similar tale. Most of the jobs lost during the pandemic were in low-pay fields such as retail, restaurants, tourism, nursing homes and temporary work. Many of those jobs will never return, yet the people who held them still have to live somewhere, and many of the new jobs created have similarly low pay.
24 Markets Where Home Prices Rose Dramatically
Local Market Monitor Inc.Local Market Monitor, Inc.