According to Richard Crenian, there are many types of real estate investments which can be alluring, and even profitable. Yet he claims that the average person can’t go a day without hearing about high house prices and the bidding wars over them in the media. Despite the trend on real estate TV shows, and low interest rate home loans, the best capitalized and experienced individual investors continue to trend towards commercial property.

Below, Richard Crenian outlines 5 reasons why investors continue to choose commercial real estate:

Return On Investment

Commercial properties tend to be worth more than individual homes or condo units. For example; a single family home may sell for $1M, and a local shopping plaza or office building may sell for $20M+. For sophisticated investors with capital, this means being able to be more efficient in the investment process. Richard believes, there is less time, energy, and wasted dollars burned in the acquisition process. They can take down one asset, versus 20 or more, and get the same result. This translates into higher net returns. Individual investors can also benefit from these efficiencies of scale by partnering with others on commercial projects.

Potential Value

Richard Crenian believes you can make money by fixing and flipping houses, or tearing down a few homes and erecting a condo building. However, there is typically a cap on when you can make these improvements, and how high you can go. In commercial real estate there are consistent opportunities to add value. This can be accomplished in a multitude of ways including: upgrading the tenant pool and rents, through lowering expenses, increasing traffic and sales to a retail property, or adding additional leasable square feet. The returns on improvements to commercial property tend to be higher, and can work during any phase of the market.

Consistency

Residential real estate values can fluctuate drastically over time. While investors can generate great profits on the upswing, the losses can be even greater on the downturn. These turns are inevitable and although residential real estate is often less volatile than the stock market, the illiquidity of a slow-moving property and pose a problem for investors. Commercial properties are valued on their income potential and performance, and are not as susceptible to major fluctuations based on neighbors defaulting on mortgage debt, or selling out cheaply. This results in more stability and liquidity.

In Conclusion

According to Richard Crenian, while some Canadian housing markets continue to appear to be red hot, investors keep leaning towards commercial real estate for a variety of important reasons, which were listed above. The reasons listed keep the real estate market hot, and allow for new and influential investments to be made across Canada, and even into the American market.