Uncertain economic conditions and challenging market conditions have led us to believe that in 2012 investment in real estate is the next big thing. Although there is no guarantee of any investment, but real estate is the only sector that has remained constant in years to come. Besides this investment is avoided keeping in mind the constant volatility, but commercial real estate investments have provide greater yield in contrast with equity investments.
Against this metaphor, Deloitte along with Real estate corporation and concluded the need of investment in office, hotel property sectors, etc. This analysis is based on volume, pricing, capitalization, rental rates/ revenues for each segment.
Advantages of investment in real estate
Higher Returns
This investment provides you higher investment returns in contrast to investment in residential property. The returns may vary from 10 percent and above depending upon tenancy and the type of tenant who has occupied the space.
Tax Benefits
The major reason what attracts anyone to such an investment is tax advantages. Investment in commercial real estate sector is subject to tax advantage.
Higher access to credit and leverage
Banks are allowed to lend loans for commercial property at a lower rate. It can be 80 to 95 percent of LVR.
Disadvantages of investment in real estate
Expertise required
You can’t just think one day and start with the process of commercial real estate investment. You need to understand and analyze the tenant and his credit record. It includes assessing tax returns and understanding business plans. If you are unable to do so, you will suffer because lending on basis of previous analysis of customer is the only way to success.
You need to understand the intricacies of this business
Most people are of the opinion that if one business succeeds at one particular location; it doesn’t mean it will succeed at different location. Also, the newbie is at a more risk of failure in contrast to established business.
Less Capital gains
Most of the talking heads are of the opinion that investment in commercial property; is not been able to enjoy same historical returns in contrast to investment in residential property.
Strategy is important
If your objective is to gain financial wealth, you need to deploy right strategies. If the strategy is wrong, it can chuck out your major investment.
Here are some strategies that are gaining popularity in present times :-
- Focus on buying properties that can be put on rent easily- In a commercial real estate market; if you want to attain win win situation; you need to buy property at a right time, right location, and at a right price. Such a property will provide you a stream of income. If the property is located on the prime location; you’ll fetch higher returns, but the profitable return will depend upon the price at which the property is bought.
- Check out if the property is available for the discounted price- there are certain prime areas where people don’t want to invest because of nearby slum area, poor interior layout, bad roads, etc. You can buy such property at a discounted rate. You can invest some bucks in interior designing, and increase the worth of the building.
Learn how to calculate the yield- Before investing in any commercial property; you need to calculate the returns that you will get. Thus, investment in real estate, is need of an hour for the year 2012.
Vijayraj Reddy
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This is very informative post for real estate investors. Thanks for sharing such a wonderful post.
Taking professional help and experts, advice is an absolute necessity in such big ticket investment like this. Your blog is a good guidance for that.