Global security investments

 

How commercial real estate investments can generate returns
An investment strategy often begins with purchasing a house, with the goal of earning profit two possible ways: first, by leasing the property and charging tenants rent as a swap for usage of the property; and, second, by capturing appreciation of the property over time.

Let's examine all these methods commercial real estate investment opportunities could possibly generate returns.

Commercial real estate investing returns

Rental income ​
One way commercial real estate can succeed as an investment is by producing rental income from the tenant or multiple tenants. Rental income, in turn, becomes cash flow or revenue for the equity owner of the property. For commercial real estate that functions via a fund (as with Fundrise), this cash flow / revenue / rental income often reaches the hands of investors in the shape of dividend distributions.

Commercial real estate's power to generate cash flow depends on several other factors, such as for example operating expenses and debt service. Property landlord duties can include maintenance and repairs, loan interest payments, rent collection, evictions, finding tenants, and ensuring that property is compliant with all applicable laws at all times.

You might consider hiring a house manager — or a complete property management company — if the task becomes too demanding, or in the event that you lack the required financial, legal, and real estate knowledge needed to manage a house and tenants. A property manager charges a fixed fee or percentage fee of earnings, which alleviates property management responsibilities, but additionally reduces monthly earning potential for you, the owner.

Maintaining a balance of vacancy versus occupancy is just a key part of successfully generating rental income — with as little vacancy as possible. Each unit that is unoccupied represents lost earning potential. Ideally, a very occupied rental property will produce a steady cash flow and consistent returns. Many owners strive 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.

The income created by rental payments is often considered passive income for the owner, depending on what they've decided to ascertain their management of operations at the building. Though some real estate investors want to be fairly hands-on, others choose to delegate operational responsibilities to property managers. In cases like those, it may be said that the cash flow supplied by rent truly is passive income with the tradeoff of yet another cost. Fundrise, however, is just a truly hands-off real estate investment option offering passive income potential while putting no property-level management responsibilities in your shoulders and maintaining a low-fee model.

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