| Investing in commercial real estate is riskier and more | | | | commercial projects. REITs were created in 1960 by |
| costly than investing in residential property - but | | | | Congress and can be a practical alternative to bonds. |
| ultimately it can be far more profitable. Whereas the | | | | Most REITs specialize in certain types of property |
| stocks of major housing manufacturers have | | | | such as office buildings, hospitals or shopping centers. |
| decreased over the last few months, retail and | | | | There are several benefits of REITs: they trade in |
| institutional investors have been investing heavily in | | | | the same way as stocks, so you can buy and sell |
| commercial real estate, through both operating | | | | them. The share price can increase in value as the |
| companies and investment trusts. | | | | property appreciates in value and shareholders also |
| The profits from commercial real estate are linked to | | | | get income from rents. |
| a large degree to the state of the overall economy - | | | | Not surprisingly, REITS have become extremely |
| today, commercial property is a $4 trillion market, | | | | popular over the last few years. Another big |
| having increased in volume around 20% over the last | | | | advantage of them is the tax benefits - by law, |
| five years. Most smaller investors are able to profit | | | | REITs must distribute 90% of their income as |
| from commercial real estate. | | | | dividends. |
| The potential profits to be made from investing in | | | | There are several ways to invest in commercial real |
| commercial real estates are affected by several | | | | estate without actually having any capital. |
| factors. Apart from the overall economy, the local | | | | Subordination is the term for the situation in which |
| economy and market can have a huge impact, as | | | | the current owner actually takes out a second |
| can the terms and length of any lease, the reliability | | | | mortgage on the property to cover the difference |
| of tenants and the overheads involved with your | | | | of the amount that the purchaser has available in the |
| property. | | | | form of a loan. |
| Generally speaking, when investing in commercial real | | | | Another method is to persuade the owner of the |
| estate, to make a profit you should ideally have a | | | | property to release some acreage. That section of |
| long term lease from a major tenant. Finding the right | | | | land can then be used to borrow money to cover a |
| tenant isn't always easy - most commercial real | | | | down payment on the rest of the property. Many |
| estate has relatively few potential tenants unlike | | | | property owners don't even know this option exists |
| residential property. | | | | and it can be an effective strategy when dealing with |
| During a recession, commercial foreclosures and | | | | raw land. |
| vacancies tend to increase significantly more than | | | | Another method is to purchase commercial property |
| residential properties. And if commercial properties | | | | by means of a partnership. If you are able and willing |
| remain vacant for a long period of time, owners may | | | | to do the work, you may be able to find a |
| lose a lot of income and be forced to resell for less | | | | partnership that is willing to finance your deal - in |
| than the property is worth. | | | | exchange for a percentage of the profits, of course. |
| One method of generating a profit from commercial | | | | Investing in commercial real estate isn't for everyone. |
| real estate is to look at REITs (Real Estate | | | | But the profits can certainly be made for those who |
| Investment Trusts). These are traded securities | | | | are prepared to take a calculated risk, have the |
| which allow an investor to take part in large scale | | | | expertise - and perhaps a little bit of luck. |