Backed by strong growth in India’s financial sectors, Commercial Real Estate is witnessing an unprecedented boom as many retail investors have begun to participate in this field with different investment objectives.
But, as you spend more and more time on building your portfolio in this sector, you might get hold on some of the common myths about CRE and have wanted to evaluate them inclusively. Although the future is bright in this field, yet you need to know how you can make an informed decision about your investment, by educating yourself on these myths.
The article will further be pointing out the common misconceptions about Commercial Real Estate among the investors and will explain the strategies of how to invest wisely in this field.
Top Misconceptions about Commercial Real Estate
Myth – Investments in CRE is too Expensive
Assumptions: It is believed that for investing in CRE, you need to be a millionaire. Yes, it’s right to some extent as most of the properties in CRE require large amounts of capital, and the transaction cost is high.
Truth: But, there are also other ways where you can snag out properties as several banks, and private lenders are willing and ready to offer financial help. It is so because the earning potential is much higher in CRE and can bring a stable and positive cash flow in recurring nature.
Moreover, there are plenty of ways where you can avoid putting down lots of money and can work on fractional ownership if money is an issue. You can refer Assetmonk for a deeper understanding of how the fractional ownership works in real estate.
Myth – Investments is CRE is too time-consuming
Assumptions: It is commonly believed that investment in CRE is time-consuming, and you can hardly find good deals.
Truth: But, this is not the case always as. Yes, to find the right deals, it does take time, but you should know which places offer good discounts. Moreover, managing a commercial property is not so time-consuming. For instance, even if you own an apartment building which requires a lot of work, your main job is to find and complete deals, and ensure that all the work relating to the property is running smoothly.
Your job is not to watch over the property every time, now and then, and fix every broken water pipe or anything that comes up. You have the option of outsourcing these work by hiring a management staff or a property manager, who will handle various tasks like overseeing the maintenance, finding qualified tenants, etc. and thus you can save both time and energy and do other work.
Myth – Investment is CRE can be a walk in the park
Assumptions: Opposite to the first myth, investors are in the belief that investments in CRE are super comfortable and surefire to make instant money.
Truth: But, this is a wrong assumption. As it depends on the type of property you choose, the area you select and includes all the relevant economic factors since the risk fluctuates over time. Even the top real estate firms take time to find lucrative properties. It’s not possible to generate profits overnight, so if you are thinking of investing, take some time, and study the market.
Myth – E-commerce has banished the investments in CRE
Assumptions: In general, people think that the explosion of e-commerce stores has completely changed the way consumers shop. They believe that the brick-and-mortar has come to extinction.
Truth: But, this is not the case. Though online shopping has become a typical method of shopping for huge masses, yet you will find a considerable number of retail sales in physical stores. This is so because the consumers trust the experiences they got to the brand’s usage. So, there is still a need for storefront offices and spaces for dining, pop-up stores.
Myth – All the CRE Properties are Advertised in the General
Assumptions: Investors while building a CRE listing, assume that they have been acquainted with all the details of property available in the online site.
Truth: But, this is hardly true. As only a small portion of the details are typically shared in the general public while the complete facts are kept in private. In reality, the agents contact the known investors who are interested in and share the data.
They either lease out or sell the property that is not even shown in public. In this way, investors get an advantage to hold on a property that lacks in competition and efficiently negotiate the selling price.
Myth – Agents in CRE are experts in the selection of Properties
Assumptions: Investors assume that working with a CRE agent is the right choice to find the best property for investing.
Truth: But, the presumptions sometimes seem to walk oppositely. Yes, it’s true that real estate agents are familiar with the properties and can present the stuff that an investor might not know, otherwise.
But, you also need to ensure that the agent you choose is in tune with the current market, and able to make predictions about it. You also need to look that the agent can crack a good deal that has high yield and minimizes the risk.
Myth – The services of the agents in CRE are Expensive
Assumptions: Investors’ next belief is that working with the agent can be costly and a mistake.
Truth: Same as said in the earlier myth, not working with the agents will be a huge mistake. As it’s the agent who can analyze the current market and knows the best deal possible for you.
And, yes they take some fees as they too are not free for the transitions they do for you. So, it’s necessary to find a well- versed and experienced agent who can save a lot of money and can be worthwhile even in the negotiation process.
Myth – Good Structures are valuable than outdated ones.
Assumptions: Investors believe that it’s the structure of the building which impresses a high sale instead of the outdated facility.
Truth: But, this is not true. As it’s not about the infrastructure that matters, it’s the location of the building that matters. Nowadays, you will find industrial spaces like warehouses distribution channels being shifted to the major cities.
This leads to cheaper transportation and catering to large customers. Besides, the number of CRE is transformed in coffee shops and even office spaces to work.
The Final Notes
The above are just some of the misconceptions to which investors fall, leading them to make poor decisions on their part for making either the sale or purchase of the commercial real estate.
Hence it’s essential to be aware of what issues are real, and what are myths for making the right decisions while investing in CRE.
Even if you hold back some misconceptions, try to address it by checking the resources available in the online medium for further understanding. As undoubtedly, investments in CRE is a profitable one.
With so many myths out on the Internet, it’s further essential that you connect to a professional expert by your side as you dive into commercial real estate.
At Assetmonk, our team of dedicated advisers specialized in the field of CRE that comes up with prime properties in the metro, and maximize your profits in a much hassle-free manner.
Misconceptions about CRE FAQ's:
It mostly depends on the investors. But, if the investors know which places to look for reasonable offers, then surely it would be not so time-consuming.
It depends on the agents you choose. Yes, agents are of course, familiar with the properties and can interpret more about the property. But, investors need to select such agents who know the current market and accordingly can make predictions.
It is believed that for investing in CRE, you need to be a millionaire.
But, there are also other ways where you can snag out properties as several banks, and private lenders are willing and ready to offer financial help. It is so because the earning potential is much higher in CRE and can bring a stable and positive cash flow in recurring nature.
In general, people think that the explosion of e-commerce stores has completely changed the way consumers shop.
But this is not the case. Though online shopping has become a standard method of shopping for huge masses, yet you will find a massive number of retail sales in physical stores. This is so because the consumers trust the experiences they got to the brand’s usage.