Office buildings constitute the primary market for commercial properties. Fundamental factors surrounding the demand for office spaces is somewhat different from those of other real estate demands. Investors primarily invest their money in office spaces to expand their portfolio in the real estate sector and at the same time earning some rental income from it. Getting into commercial real estate as a novice can be quite intimidating in the initial stages but it often gets easier with time, giving investors the opportunity to consider different investment options while expanding their portfolio. With the advent of technology, the possibilities are endless because now investors can just log on to their computers and find Online Property Portal to compare and study the real estate trends and numbers to make an informed decision.
Why invest in an office space?
Other than just expanding your portfolio, investing in commercial property could be sure-fire way of investing in a safety net in future. There are numerous reasons why investing in an office space is the right leap for you. Here are five reasons why investing in office spaces should be your priority:
- Increased income potential: Rent is an obvious source of income for commercial property owners. Depending on how long a tenant makes utilises the office space, then you are guaranteed of rental income, supplemented your other investments since the number of tenants in the office space have the potential of holding for some years. The rental income collected could be much higher than other investment options like stock dividends, which averagely yield 2-3% returns annually.
- Spreading the risks: Diversifying your portfolio in different investment options means losses will be minimised. This is because office spaces are multiple occupancy buildings that greatly constitute to less rental income loss. Investing in just one residential property could is riskier because with just a single hit at the market then your investment crash thus diversification means you will have something to fall back on when the other crashes.
- Excellent appreciation value: The value attached to commercial properties tend to increase steadily over time. Investor are more likely to earn good returns on investment other than the rental income. Inflation is a huge industry player in value appreciation of office spaces because even though it might cost relatively more to erect new properties, the older properties’ value will continue soaring exponentially, hand in hand with other newer developments.
- Leveraging to increase cash flows: The value of much of what is invested in office spaces is increased via leveraging, which in turn ensures higher equity potential. Leveraging is the use of borrowed funds to invest expecting that the interest incurred would be much lower than the expected profits. This is smart move because an investor can commit some capital on a commercial property then source for financing of the remaining value then diversify the investment portfolio by investing in other properties. Outright buying of properties could cost you a lot more returns on investment as compared to leveraging. The stability of rental income from office spaces makes it easy for investors to seek bank financing provided that you are not over-leveraging.
- Better landlord-tenant relationships: In residential properties, chances are that these relationships could be strained because they are quite informal. However, for office spaces, the relationship are more professional since it’s from one business to another. Such relationships are relatively easier to maintain compared to residential properties. Furthermore, business often operate during office hours and that is during the day hence there are limited emergency night calls on issues concerning maintenance or associated concerns. Tenants understand that it’s a business like any other and it needs operational costs, meaning that they would be less troublesome when it comes to payment of rent or taking care of the property in general.