The purchase and sale of commercial real estate yields one of the most consistent turnovers among investments. This is not even mentioning the steady cash flow and potential for continuous investment growth. This means that if one does decide to invest in commercial property, they can expect to have a platform to branch out their investment portfolio while still earning a steady income in the process.
Real Estate Investment Trust (REIT)
A very important aspect of property investments in general, and commercial property in particular, is a Real Estate Investment Trust (REIT). REIT is a type of collective investment. This investment option would enable a potential investor to invest some revenue in a real estate portfolio based on a definite income generation plan. The nature of these real estate investments is commercial properties, like shopping malls, office spaces, hotels, and residential properties, like apartments. These assets are then leased or rented to then generate income for the investors.
REITs are a key topic to consider when talking about anything to do with constructing equity or fixed-income portfolios. The pros are that it gives greater diversification, potential for higher returns, and lower overall risk. In addition, they form an excellent counterbalance to stocks, bonds, and cash because of their inherent ability to generate a dividend income along with capital appreciation. Realistically, REITs allow average Americans the opportunity to benefit from a piece of valuable real estate property, the opportunity to gain access to dividend-based income and regular returns. This also allows the community to grow, evolve, and prosper.
Most REITs have a very simple business model. Basically, it involves leasing space and collecting rent on real estate, which allows the company to generate income that is then paid out to shareholders in the form of dividends. As a result, these REITs pay 90% of their taxable income to the shareholders, and the income taxes are, in turn, paid by the shareholders.
Historically, REITs are one of the best-performing asset classes available today—annual return of 9.5% between 2010 and 2020.
- Rental income, dividends and rent: Income from rent is the most obvious income earned by a REIT by direct investments in properties, whereas divided income is earned if such instruments are made through a SPV. This is especially applicable for commercial property investments. It is required to distribute the income generated after deducting expenses.
- Capital Appreciation: The units of the REIT also appreciate or depreciate in value depending on the market. The advantage here is the value of the investment grows in tandem with the value of the property in question.
At WealthBCI, we aim to help you make an informed, streamlined, and exciting choice on your investment. We encourage our clients and partner them with accredited, non-accredited, and sophisticated investors. In addition, we ensure that we plan projects such that our clients enjoy, not just a long-term steady cash flow, but implore a viable exit strategy on exciting commercial properties.