Are you wondering whether to invest in commercial real estate (CRE) or stocks? This question is often posed by potential investors looking at multiplying their returns. While stocks offer great liquidity as they are quick and easy to sell, commercial real estate offers high returns and the pride of ownership. In the long run, commercial real estate often emerges as the more sensible choice for investors.
Commercial properties offer a regular stream of income at a higher rate than most other asset classes. With a regular renewal of leases and fewer vacancies, CRE assures a regular flow of income. Investment in CRE properties in active markets is likely to produce higher yields than stocks.
According to experts, commercial real estate appreciates faster than other investments. One can expect 15-20 percent CAGR (compounded annual growth rate) from CRE in the medium to long term. By making regular improvements on your investment you can make it more appealing, thereby, increasing the appreciation of your asset.
Investment in CRE puts you in complete charge of the asset as you are free to make improvements, cut costs, raise rents and find better tenants. On the other hand, when you invest in the stocks of a company, you are at the mercy of its management. One bad move or wrong acquisition could lead to losses and depreciation of the value of your investment.
A commercial property is a tangible asset that can be utilized according to your wishes. That’s not the case with stocks.
The value of a commercial property is easy to analyze by calculating the running expenses and rental income. Whereas stocks are valued on the basis of company reports and numbers that can be inflated and misrepresented.
The demand for commercial properties is higher than ever with many companies in an expansion mode. Even as CRE looks like an attractive option, you need moderate to large capital to invest in a good office space. For beginners, ready commercial office properties are more suitable as they provide steady cash flow and expectations of future appreciation.