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4 Ways Retail Property Can Build Your Wealth

By Colby Goetz
December 15, 2017

Investing in retail property is an excellent way to build wealth, for even the novice investor. In fact, commercial real estate is one of the wisest investment choices you can make, so it might be worth considering it. You will want to find some property valuers who can give you an accurate valuation of the property before you make any offers though. You want to make sure you are getting good value for your money. Properties on the market are often valued higher than they might be worth or have features that will depreciate quickly over time. A valuer will help mitigate these factors (see this property valuers article on preventing value depreciation for more information) and can even suggest actions that will increase value. If the property you are interested in is valued accurately, then at that point you might want to consider consulting with an accountant experienced with investment properties. A Property Accountant can determine if it’s an affordable investment for your portfolio. However, it might also be worth considering an investment in the business itself. As businesses grow, they can decide to make themselves public for people to buy shares in their company. This gives the store more capital and helps the investor to make some money too. Usually, investors will look to bigger businesses, but some do prefer smaller stores that have the potential to grow. When these businesses grow, the investor’s share will be worth a lot more than what they originally paid for it, allowing them to make some money if they chose to sell it on one of the share trading platforms south africa has to offer, for example. That’s another way to make some money off a company. However, if you’re interested in commercial property as an investment, keep reading to learn more. Here are just a few ways commercial real estate can grow your capital.

1. Commercial retail property provides a stable stream of income

In contrast to residential real estate, commercial properties can offer you longer leases, higher income, and more reliable tenants long-term. “Importantly, the income investors earn from commercial property is stable. Tenants, such as businesses and government, lease buildings generally between 3 to 10 years, sometimes longer. Those long-term leases provide income security. Residential tenants, however, typically sign up for just 6 to 12 months, and in most states they can break that lease with 8 weeks’ notice. Within commercial property’s longer leases are fixed escalations in rent – each year rents are increased at an agreed rate of around 3 to 4.5 per cent. There is also much less chance of a commercial property being damaged by a rogue tenant.” –Christopher Davitt

2. Commercial retail property offers a high return on investment (ROI)

Commercial retail property will offer the investor a much higher return on investment than a residential property can. Here are the basics of ROI: “If you want to invest in commercial real estate, you must know how to calculate the Net Operating Income. Commercial property value is determined by how much an investor is willing to pay for the Net Operating Income. The investor trades their investment dollars for the property’s income. The rate that the income pays back to the investor for their investment is called the return on investment. The sales price is determined by how much the investor is willing to pay for projected Net Operating Income. Value = Net Operating Income/Desired Return.” –Spencer Cullor

3. Investing in retail property fosters relationships with local businesses

Owning retail property puts you in a great place to build positive working relationships with local business owners. These relationships are beneficial to both you and your tenants, helping you both create a mutual partnership that creates an ideal tenant mix in great spaces.

4. Commercial real estate offers a hedge against market fluctuations

One of the great beauties of commercial real estate is its stability. Since your capital is invested in a brick-and-mortar space, there’s a tangibility to it that elevates your dollars beyond the diaphanous nature of stocks and bonds. Commercial real estate is a stable, reliable choice to build your wealth in an unpredictable, fluctuating economy.

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