Did you know that investing in warehouse real estate is more profitable than most of the other forms of commercial real estate? Let’s investigate the unique advantages of warehouse real estate investing.
We are all aware of the fact that real estate investing has been a popular passive income strategy for quite a long time. One of the best and safest ways to make money in real estate is to invest in warehouses, which are a type of commercial real estate.
Some people tend to limit themselves by investing in residential real estate, trying to avoid the risk of being associated with commercial real estate investing. But, commercial real estate, just like warehouses, offers significantly higher returns compared to the residential real estate.
That is due to the fact that warehouses tend to appreciate in value, both from internal and external causes. For example, one internal factor that can influence the value of a warehouse is proactive management. This includes establishing cost-effective improvements on the property, which improves the usability of the property and the overall attractiveness of the property.
External factors may include variations in supply and demand for warehouse spaces. As the local business and real estate market grow simultaneously, more and more people need real estate but space becomes more scarce, hence the increase of each property value.
Let’s explore other reasons why warehouses are still a good investment.
#1 High level of versatility
Investing in warehouses does not necessarily have to mean it will be used for storage. The space can be modified to be used for practically any other business purpose. Manufacturers can convert the warehouse space into a production site for their goods for example.
Warehouses are also a great option for club space, restaurant, offices or even smaller retail spaces. Warehouse space is very flexible and you can convert it into whatever you feel like is the most profitable for you.
Investing in warehouse real estate can be substantially more than just the storage aspect.
#2 Reliable source of passive income
Due to the long-term leases, investors get a fixed amount of passive income monthly. This recurring amount of money for five to fifteen years for the duration of the contract is passive once the property is leased up with the tenants, other than monthly maintenance and management.
#3 Businesses compete for logistical space
When speaking of logistics, the international term for industrial warehousing is creating some new competition in the secondary commercial real estate markets. Demand for these types of assets is outperforming retail and office, and it is the commercial real estate with one of the highest demands across the globe. With the low cap rates, secondary markets are proving to be very viable options now that primary asset prices are on the rise, all in efforts to move products and goods faster.
When it comes to real estate investments and choosing where to invest the money, many people are drawn to the residential properties. However, commercial properties can, and usually are, more profitable in many ways.
Despite the weakened economy and the housing sector struggling to gain traction, the demand for warehouses is great. This alone can benefit the entire housing sector. Those investors who take advantage of this situation and act fast, may be rewarded accordingly.
We hope this introduction to warehouse real estate investments inspires you to take the next step. Always do your homework and research it thoroughly, as well as consult a fiduciary financial professional before conducting any major investment decision.