Tokenized global securities

 

How commercial real-estate investments can generate returns
An investment strategy often begins with purchasing a property, with the aim of earning 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 all 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, 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 shape of dividend distributions.

Commercial real estate's capability to generate cash flow depends on a number of 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 whole 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 handle a property and tenants. A property manager charges a fixed fee or percentage fee of earnings, which alleviates property management responsibilities, but additionally reduces monthly earning prospect of 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 constant 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 where you're considering investments.

The income produced by rental payments is frequently considered passive income for the master, depending on how they've decided to ascertain their management of operations at the building. Although some real-estate investors like to be fairly hands-on, others would rather delegate operational responsibilities to property managers. In cases like those, it can be said that the bucks flow given by rent truly is passive income with the tradeoff of an additional cost. Fundrise, however, is a truly hands-off real-estate investment option offering passive income potential while putting no property-level management responsibilities on your shoulders and maintaining a low-fee model.

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