Like any other type of investing, real estate investment comes in different flavors. Even though independent investors mostly own residential investments, the biggest real estate investors in the world make their profits on commercial properties. Here Haysha Deitsch recognizes all the pros and cons of investing in commercial properties, and what it takes in order to become one. With commercial real estate, the numbers are bigger, the technical disciplines are more complex and the money is generally bigger. Having a commercial real estate assets in your investment portfolio can be a complicated task, but on the other end, it can also be the most profitable one.
Commercial properties are properties that are leased out for workspace instead than a living space as it is with residential real estate. Office buildings, malls, shops, and restaurants are all good examples of commercial real estate. Usually, properties are sold by the building, but in case the developer wants to expand his project or hopes to see returns quickly, he is allowed and can easily break down the project into smaller units instead of selling it as a whole building. With more than 15 years of experience in the real estate field, Deitsch has seen plenty of investors do that and get profitable returns.
Commercial real estate investor often benefit from the comparably longer lease contracts with tenants, when compared with residential real estate. Residential leases are usually meant for shorter periods, somewhere around three to six months. On the other hand, as Deitsch points out, commercial leases are usually arranged for at least one year, although there are plenty situations in which commercial real estate leases last for 10 years or more. As long as the building is occupied by long-term tenants, the holder of the commercial real estate gets a considerable amount of cash flow stability. Haysha believes that the US commercial real estate still has room to grow simply because the demand is strong, and in the near future he sees low-risk high-reward in a low-return environment.