Real estate investment fund

 

How commercial property investments can generate returns
An investment strategy often begins with purchasing a house, with the aim of creating profit two possible ways: first, by leasing the property and charging tenants rent in exchange for use of the property; and, second, by capturing appreciation of the property over time.

Let's examine each one of these techniques commercial property investment opportunities could possibly generate returns.

Commercial property investing returns

Rental income ​
One way commercial property 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 property that functions through 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 capability to generate cash flow depends on numerous 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 might consider hiring a house manager — or a complete property management company — if the task becomes too demanding, or if you lack the mandatory financial, legal, and property knowledge needed to manage a house and tenants. Home manager charges a fixed fee or percentage fee of earnings, which alleviates property management responsibilities, but also reduces monthly earning prospect of you, the owner.

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

The income made by rental payments is often considered passive income for the owner, depending on what they've decided to establish their management of operations at the building. While some property investors want 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 provided by rent truly is passive income with the tradeoff of one more cost. Fundrise, however, is a truly hands-off property 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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