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How commercial real estate investments can generate returns
An investment strategy often begins with purchasing a property, with the aim of creating profit two possible ways: first, by leasing the property and charging tenants rent in exchange 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 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, subsequently, becomes cash flow or revenue for the equity owner of the property. For commercial real estate that functions by way of 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 power 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 could consider hiring a property manager — or a complete 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 property and tenants. A house manager charges a fixed fee or percentage fee of earnings, which alleviates property management responsibilities, but also reduces monthly earning possibility of you, the owner.

Maintaining a balance of vacancy versus occupancy is really a key part 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 steady cash flow and consistent returns. Many owners shoot for a 90% occupancy rate or higher. It's 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 dog owner, depending how they've decided to establish 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 stated that the cash flow supplied by rent truly is passive income with the tradeoff of one more 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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