Why Commercial Real Estate Is An Important Investment Class
The perfect investment — one that is highly profitable and completely secure, with numerous tax advantages and stability — is, like the unicorn, a mythical beast. Investment has always, from its very beginning, entailed the idea of some risk.
When many investors think of a well-diversified portfolio, they often only think in terms of investments like stocks and bonds, or maybe a mutual fund or ETF. Savvy investors understand the importance of having a diversified portfolio. Diversification protects you against losses. If one investment class performs poorly, you can still reap gains from others. It’s a balancing act that works. A truly diverse portfolio will go beyond just investing in stocks and bonds and also include assets like commercial real estate (CRE).
Even when market cycles fluctuate for one reason or another, CRE remains a desirable investment thanks to its stable nature. That steady nature makes commercial real estate a great way to diversify a portfolio. In addition, investing directly in CRE offers assets that can appreciate and provide cash flow.
Let’s look a little more in-depth at the advantages of investing in commercial real estate.
Solid Returns Over Time
In general, most investors understand that it is better to hold an asset over time than to jump in and out chasing gains. In this respect, CRE can provide solid, predictable returns. Investors in commercial real estate typically receive steady cash flow for their investments, with income generally distributed annually, quarterly or even monthly. That’s because high occupancies and predictable rents often provide the steady cash flow that most investors are looking for.