Sunday, November 9, 2014

Diversifying your investment portfolio with commercial real estate assets

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A traditional real estate portfolio consists of investments made on personal real estate properties. Typically, investors are encouraged to place stocks on private assets because these are easier to maintain and control. Since these properties are mainly for personal use (that is, for someone to live in), there are less requirements and policies to consider after the initial down payment. This is generally good practice, but with the ever changing and fluctuating global market, many real estate advisors, such as Steve Liefschultz, suggest diversifying the portfolio to include commercial real estate assets.

By investing in commercial real estate, the investor significantly reduces any financial loss or risk that could be incurred in any market crisis. The secret to stable income from such investment lies in a well-balanced and maintained portfolio that is strong enough to counteract any type of fluctuation.

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Before anything else though, several main differences between commercial and residential properties have to be kept in mind. Some of these might be obvious, but the smart investor understands that calculated risks and judicious assessment assessment are always the plan. Here they are as compiled at by Danielle Babb:

Commercial assets are valued differently. Commercial properties are sold based on their income from usable square footage.

Cash flow is greater. Commercial assets are normally leased to several tenants who help increase the yield per square foot than a standard single-family property.

Commercial leases are longer. This helps the investor’s cash flow since stability ensures a more balanced portfolio.

As with any investment, it is highly recommended that the investor do his or her research before buying anything. The legwork does not only include online studies but also actually talking to previous owners or managers, if possible. The personal stories of leases and their opinions on the specific property will prove priceless in the decision making.

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Steve Liefschultz of Equity Bank has helped hundreds of clients make better decisions regarding their real estate properties. For more information, please visit this website.