Real estate investment company

 

How commercial real-estate investments can generate returns
An investment strategy often begins with purchasing a house, with desire to of making profit 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 one of these ways that 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 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 through a fund (as with Fundrise), this cash flow / revenue / rental income often reaches the hands of investors in the form of dividend distributions.

Commercial real estate's ability 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 job becomes too demanding, or in the event that you lack the necessary financial, legal, and real-estate knowledge needed to handle a house and tenants. A house manager charges a fixed fee or percentage fee of earnings, which alleviates property management responsibilities, but also reduces monthly earning potential for you, the owner.

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

The income created by rental payments is often considered passive income for the master, depending on what they've decided to ascertain their management of operations at the building. Though some real-estate investors like to be fairly hands-on, others prefer to delegate operational responsibilities to property managers. In cases like those, it could be said that the bucks flow given by rent truly is passive income with the tradeoff of one more cost. Fundrise, however, is 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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