What Role Should Commercial Property Have In Your Portfolio
Commercial real estate is an important financial tool. It is a core investment of large funds, banks, corporations, small business, and sophisticated individual investors. In fact, it often plays a key role in individual and family’s investment portfolios.
This type of investment is notably different to other business or real estate investments. This is critical to realize and understand. The value of commercial property investment is starkly different to your personal residence, any second or vacation homes you may own, and even residential rental property investments. It is a different asset class, with its own benefits, and which operates on different cycles.
Analysts and experts vary on how much of this type of asset investors should have in their portfolios. For some financial institutions, it is a substantial portion of their portfolio. Some notable investors that have very different opinions on what’s right for an individual investor. Peter Thiel (PayPal) is an advocate for going all in, heavily on great investments. Warren Buffett believes in taking sizable stakes, but across a wide variety of industries.
Reasons to Invest in Commercial Real Estate
Income is a primary driver for many who invest in commercial real estate. Passive income generated by rents is one of the most desirable and needed outcomes from investing today. In the larger investment landscape it can be very elusive too. Bonds and stocks are not reliable for attractive cash flow returns. It’s one of commercial property’s strong suits.
Wealth preservation is another major reason that sophisticated investors choose this asset class. It provides a tangible asset that cannot be wiped out by volatility or emotion stockholders. Even in the ultra-worst case scenarios, the land is still there, and that is where the bulk of the value is. It is a stronghold for protecting capital and your nest egg.
Even better, and where commercial real estate really stands head and shoulders above most investment options is the ability to add value. That means the ability to control your asset and portfolio value. This can be done in any phase of the market or economy; sheltering your investments, and providing the potential for great leaps in wealth growth.
Commercial property has a place in everyone’s portfolio. Whether that is 30% or 70% of your portfolio is an individual call, and may depend a lot on how much you need the benefits of passive income, wealth preservation, and growth potential. Sooner or later we all need that, and this is a great cornerstone investment for protecting and fueling long term financial plans.