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Good Investment

March 27th, 2019

Is Owning Commercial Real Estate a Good Investment—Can You Make Money in It?

If done correctly, yes. Primarily, investors profit from commercial real estate by collecting the cash flow from the property (if investment), building equity by paying down the principal balance of their loan, and by the property appreciating in value over time. Another way to make money from commercial properties is through speculative development or value-add by re-stabilizing or substantially rehabilitating an existing building. However, that is not an approach we would recommend for new investors as it can be very expensive and extremely risky unless you are already well-reversed in construction and tenanting.

Although a person with any background can become a commercial real estate investor in the right circumstances, the wrong misstep can wipe out any or all of the profitability of a property, so it’s important to pay attention throughout the entire purchasing and financing process. Typical mistakes investors make include over-paying for a property, not verifying leases or financial statements, taking on an asset or market they don’t understand, or being on a loan product poorly suited for their needs.