How Investors Create Returns through Commercial Real Estate Appreciation
About 48% of American millionaires generated their wealth through real estate. With that track record of higher returns and security, commercial real estate (CRE) is an attractive and profitable type of investment. If you’re looking for the best way to generate wealth through investments, you might want to consider CRE investing.
One of the ways investors generate returns with their CRE investments is through appreciation. This article outlines what you need to know about commercial real estate appreciation. But first, let’s lay the foundation for commercial real estate.
What is Commercial Real Estate (CRE)?
This is a type of property investment that’s being leased out for retail and business. As a commercial real estate investor, you’d be involved in purchasing or developing properties that are designed for multifamily units or house commercial tenants.
Commercial real estate appreciation at work
One of the ways that commercial real estate investors create returns is through appreciation—when the property’s value increases and is realized when it’s sold.
The value of commercial real estate properties significantly increases over time. However, most real estate investors assume that the conservative annual appreciation rate is between 4-6%. To illustrate, a commercial property that’s worth $1,000,000 would already be valued at over $1,300,000 after 5 years based on a 6% annual appreciation rate.
CRE appreciation is only one aspect that you can guarantee returns on this type of investment. There are other different ways that a commercial real estate property increases its value:
- Location
- Development
- Improvement
- Inflation
Why CRE investing is the most viable option to grow your portfolio
Security and Diversity
Most properties for commercial real estate address people’s basic need for shelter, services, and storage solutions for business owners. Common commercial real estate examples would be building manufactured homes, condominiums, apartment buildings, retail space, office space, industrial storage, and warehouses. Most commercial properties are designed to house multiple tenants. With this, the commercial real estate investor does not rely on one tenant’s rent to expect returns on their investment. For example, if your commercial building has multiple units for offices and retail shops, and you lose a single tenant, the financial impact would be minimal. Even with an 80% occupancy rate, investors will have a steady stream of dividends. These dividends or returns can be scheduled to be distributed monthly, quarterly, or annually.
Over the course of American history, investing in commercial real estate has shown to be the most profitable investment opportunity.
If you are looking for advice you can trust, answers to your commercial real estate questions and an opportunity at a sound investment contact us here at Trajan CRE. It all starts with a conversation.
