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

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

Commercial real estate investing returns

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

Commercial real estate's capability to generate cash flow is dependent upon several other factors, such as 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 may consider hiring a house manager — or an entire property management company — if the work becomes too demanding, or in the event that you lack the necessary 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 in addition reduces monthly earning possibility of you, the owner.

Maintaining a balance of vacancy versus occupancy is really a key section of successfully generating rental income — with as little vacancy as possible. Each unit that's unoccupied represents lost earning potential. Ideally, a highly occupied rental property will produce a constant cash flow and consistent returns. Many owners aim for a 90% occupancy rate or higher. It's crucial that you closely consider vacancy rates and occupancy rates for the areas where you're considering investments.

The income created by rental payments is usually considered passive income for the owner, depending how they've decided to determine 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 could be said that the money flow given by rent truly is passive income with the tradeoff of an additional cost. Fundrise, however, is really a truly hands-off real estate investment option offering passive income potential while putting no property-level management responsibilities on your own shoulders and maintaining a low-fee model.

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