By Kilundo Mbithi
Real estate is often termed as one of the safest investment avenues. In fact, real estate investment done with proper evaluation of the property (and its true value), can lead to good profits. It’s no wonder some people pursue real estate investment as their full-time job. And discussions on real estate investments are generally biased towards residential real estate; commercial real estate seems to take a back seat. However, commercial real estate is also a good investment option.
Commercial real estate actually includes a variety of properties even though most people only relate office complexes or factories/ industrial units when they think about it. However, commercial real estate includes much more.
Health care centres, retail structures and warehouses are all good examples of commercial real estate. Even residential properties like apartments or any property that consists of more than four residential units are considered commercial real estate. In fact, such commercial real estate is much in demand.
So, is commercial real estate really profitable? Resoundingly yes, if you know what to do. Generally, the challenge with commercial real estate lies in the difficulty of recognizing the opportunity as compared to residential real estate. Still, commercial real estate profits can be real big, much bigger even than you would expect from residential real estate of similar proportion.
An investor could take up commercial real estate for either reselling after appreciation or for renting out to, say, retailers. In many cases, commercial real estate developments are regarded as the first signs for the potential growth of residential real estate. Once you know of the possibility of significant commercial growth in the area either due to significant infrastructural development or whatever, you should start evaluating the potential for appreciation in the prices of commercial real estate and then go for it quickly. And you must really work towards getting a good deal.
One way for investors to own commercial real estate, e.g. land available in big chunks which are too expensive for you to buy and develop, is by forming an investor group with friends or partners of similar interest thus owning the property together and sharing the profits.
In some cases e.g. when a retail boom is expected in an area, you might find it profitable to buy a property that you can convert into a warehouse for the purpose of renting to small businesses. Commercial real estate presents an overkill of investing opportunities; from warehouses, factories, student hostels to offices e.t.c, you just need to do some market research and embark on the opportunity.
Perhaps the coming month or year is the time to test the waters.
The Author is a Valuer & Registered Estate Agent and runs an investor education & coaching program at www.investorclinics.com