Top 4 Myths About Commercial Real Estate Investing

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There are many myths associated with any industry and real estate is no different. There have been many myths that have been associated since the beginning and the list has grown over time. Real estate, particularly commercial real estate segment, has been at the receiving end of the situation in India also. This is so because few people understand commercial real estate and factors that influence investing and managing it. There are a number of aspects that should be taken into account in different geographies for determining the prospects of commercial real estate.

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Here are some of the top myths surrounding commercial real estate and the reality thereof:

Myth Number 1 Investment in Commercial Real Estate Is Very Risky

Reality

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Investment in commercial real estate is not risky and is far safer than many other types of investment like equity markets and capital markets. It is a very safe investment and the property can give very stable returns in the short to medium to long terms if the investor is circumvent. In the Indian context, commercial real estate has very bright prospects and since there has always been appreciation in value of property, the investment can only grow. The property cannot be stolen or taken away by anyone.

Myth Number 2 Investment In Commercial Real Estate Is Very Complex

Reality

Investment in commercial real is extremely simple and sometimes more simplified than residential real estate. The commercial real estate usually involves large amount and the investor can be saved from the trouble of managing a complex portfolio of many residential properties. In fact, in commercial real estate there are fewer people to deal after an investment in a property has been made. Collection of rent, for example, can be from just one or fewer tenants. One has to just understand market dynamics of the area where the commercial property is located and once it is determined that the area is showing good opportunities of growth, the investment can be made. It is, however, important to choose property of a reputed developer while making investment in commercial real estate. There are larger and professional companies working as brokers in commercial real estate than in residential real estate and help from them can sought before investment.

Myth Number 3 Funding The Purchase Of Commercial Property is Difficult

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Reality

The funding options for purchase of commercial real estate are more than that of residential real estate. There is usually only home loan that can be taken for residential real estate. For commercial real estate, there are several types of loans that can be availed from a bank or even NBFC. The repayment of loans for commercial real estate can be done over several years in easy instalments. Banks are willing to give loans for commercial real estate almost without any document if the reputation of the company availing the loan is good.

Myth Number 4 The Market Condition Should Guide Purchasing Decision For Commercial Real Estate

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Reality

This is partially correct but the purchasing decision also depends on factors like the investors financial health and how much can be afforded. Things like current income, fund flow, expansion planned, insurance requirements, EMI options and loans options available should be taken into account while taking investment decisions.

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