Low Risk, Stable Return
Commercial real estate is a particularly attractive option due to its ability to deliver a stable rate of return over long periods of time, with a relatively low-risk factor. The National Council of Real Estate Investment Fiduciaries (NCREIF) Index has reported an average annual return of 8.8% over the past 15 years, which is almost 200 basis points above the average performance of the S&P 500 for the same timeframe. Additionally, a major portion of the returns from commercial real estate are realized monthly in the form of rent, often secured by a corporate guarantee. Most gains in the stock market are in the form of appreciation and are only realized if and when you sell.
First Way to Make Money: Rental Income
An investment strategy often begins with purchasing a property, to make money in two possible ways: first, by leasing the property and charging tenants rent in exchange for the use of the property; and, second, by capturing appreciation of the property over time. Commercial real estate can succeed as an investment by producing rental income from a tenant or multiple tenants. Rental income, in turn, becomes revenue for the property owner.
Second Way to Make Money: Property Appreciation
Another opportunity for returns and profitability of a commercial real estate investment comes from any increase in the property’s equity value – or appreciation – over the period of ownership. Properties can also lose value, and even the most disciplined, proven investment strategies can’t guarantee gains, because outside economic forces can impact a real estate investment’s value. All types of property have the potential for appreciation in asset value and profitability, from raw land to a site home to an extensive apartment housing already developed.
Real estate investments historically appreciate in value. As long as you can wait out a cycle, real estate values almost always recover. In the stock market virtually all of your gain is realized by buying and selling at the right time. With investment real estate most of your gain is captured in rents guaranteed by your corporate tenant. In addition to rental income, owners of quality commercial real estate also stand to benefit from the intrinsic nature of real estate value appreciation.
In summary, a tangible asset with a secure lease can deliver safe, secure, and stable returns all while enjoying the benefits of appreciation over time. Check out our latest available properties to begin your journey to low-risk, stable returns: www.millcreekcommercial.com/available-properties/