When it comes to the benefits of an investment in commercial real estate, one remarkable bonus is the guarantee of the generation of a predictable cash flow.
Developing Steady, Consistent, and Predictable Cash Flows
Quality commercial real estate investments typically deliver predictable cash flows with income distributed to investors monthly. Ideally, a highly occupied rental property will produce a steady cash flow and consistent returns. Many owners aim for a 90% occupancy rate or higher. It’s important to closely consider vacancy rates and occupancy rates for the areas in which you’re considering investments.
Commercial real estate leases are usually longer than residential leases, therefore predicting cash flow year-over-year is easier. Because commercial rents are often guaranteed by a large public corporation periodic interruptions are uncommon. Getting your monthly check is sure, secure, and stable.
Stocks vs. Commercial Real Estate
Unlike publicly traded stocks, direct commercial real estate investing can provide stable cash flow in the form of rental income, often without the volatility of public investments. Adding real estate to an investment portfolio can offer the benefits of new cash flow, long-term appreciation potential, and portfolio diversification.
One fundamental advantage to commercial real estate investment is that it is backed by hard assets. This class of investment differs dramatically from buying shares in a company. Companies come and go, but real estate is something tangible that investors can touch and feel. Your commercial occupants may change over time, but the property itself will not evaporate through bankruptcy or corporate restructuring.
Millcreek Commercial partner, Spencer Taylor, covered this topic in more depth on our podcast, The Commercial Connection. Check out that episode here. You can find more information on our podcast here.