Commercial real estate has an incredibly good return and attractive investment opportunity. However, for many first-time or beginner investors, commercial real estate investing is surrounded by many misconceptions and misunderstandings.
Myth 1 # Too expensive
It’s true that commercial properties do require a large capital investment, but there are several private money lenders and banks willing to finance your commercial real estate investment.
Moreover, private money lenders will often be more attracted to a commercial investment than a residential investment. This is because commercial properties have more profit potential and more stable recurring income. In results, the debtor will have the power to pay back their monthly installment.
Myth 2 # Too much risk
Every investment involves risk, and commercial real estate investment is no exception.
Let’s say a residential property costs you RM400,000, while a commercial property costs you RM1,200,000. Does the commercial property represent a 300% higher risk? It depends, but not that much riskier.
The risk level of a commercial property is determined by several important factors such as properties could not find a tenant and the property was vacant for a long time, needing to bear high costs and expenses, and more. When there is the tenant, he or she is responsible for ongoing expenses, which are less risky. Returns will be steady.
Office properties, on the other hand, have higher risk and are more volatile. Remember, the more volatile a property is, the higher the risk and ultimately, the profit. The key is to find a good balance between low risk and high profit that works for you.
Myth 3 # – Good deals are hard to find
First of all, the term “good” is subjective and individual-based. A deal that is good to you may be a waste to other people.
However, there are always good investments in real estate, at all times. It all depends on how you find and buy the property. When the market is down, some people prefer to buy properties because in the long run the property should appreciate.
The key is to become a good researcher. By doing your research, you will find them!
Myth 4 # Brick-and-mortar retail is being replaced by e-commerce
In reality, brick-and-mortar retail remains vital, though a transformation toward experiential retail is accelerating. In Malaysia, consumers are often looking for a shopping experience rather than online shopping.
Although e-hailing and p-hailing is increasingly booming and physical stores closed down during the pandemic. TRUST me, just temporarily. As during Malaysia’s lockdown, everyone prefers to stay at home and online shopping, but when the lockdown is over, there's a crowd coming out to have dinner, shopping, sports, and more.
Myth 5 # If a property is for sale, something is wrong with it
There’s many reasons when people sell properties. Some people sell property because they have an exit strategy in mind. Some people sell off their property because they want the cash flow to buy another bigger and more profitable property.
In fact, all of the same due diligence actions like inspection, title search, etc. — should be done with a commercial real estate holding as well.
Are you interested in investing in commercial real estate? We can provide you with complimentary real estate advice including assessing a commercial property’s potential, financial analysis, real estate market trend, location analysis, strategic marketing plan, and more.
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