Tag Archives: Commercial Real Estate Investments

5 Questions, Capital Markets, Investments, Real Estate

What is a REIT?

https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcRYBAHkwnarbu9LPlb2LxrGMWeav02EJTXNXcGneJmmLBFq_BZKREIT is the acronym for Real Estate Investment Trust. According to the National Institute of Real Estate Investment Trusts 190 Re Its are currently registered with the SEC and trade on one or more of the New York Stock Exchanges. There are over 900 REITS that are privately held companies.

The advantage to investors in the REIT is the source of income it provides. Specifically, due to the structure of the REIT it does not accrue corporate tax, instead it returns all of the taxable income to investors. The investor receives a 1099 form for tax purposes and it is therefore taxed like additional income.

The REIT can be designed to fit almost any scenario available in the real property world. It can play the upside and the downside and provide hybrid type coverage. Primarily the REIT is composed of commercial property including shopping malls, apartment complexes and income producing property. It also is packaged with residential real estate of a particular type. Continue reading →

5 Questions, Contracts & Legal, Finance, Investments, MyOrbit Blogs, Real Estate

Notes for Commercial Real Estate Investments

Commercial real estate is defined as property that is used for the purpose of commerce. For example, an office building, a warehouse, retail store, shopping center or an apartment building with five or more units.

Today in 2010, due to the global recession since 2008, there is a much higher supply of commercial real estate than its demand, and hence the prices are attractive and can be negotiated hard by interested buyers.

http://images.businessweek.com/ss/07/05/0529_commercialrealestate/image/4_gherkinbuilding.jpg

We expect that commercial real estate prices may correct by 10-20% in 2011 depending on the country and city. In general one can’t go wrong with buying commercial real estate (office space, rather than shopping malls) in big cities if the time frame is 5-10 years.

The risk-reward is more in commercial property than in residential property. Commercial real estate returns can give attractive over 5-10 year period; much better than you would get from residential real estate of the same proportion.

Location is very important in commercial real estate. Our experience has been that “it is better in general” to have a small space at a busy city-center/downtown place, than to a big space at a suburb.

London and New York are two cities that will deliver good returns despite recession if you can invest for 5-10 years. Irrespective of where you are in the world, see if you can invest in commercial property in high growth cities like Mumbai, New Delhi, Hong Kong, Shanghai, etc. These cities can deliver 5x returns in 10 years. Continue reading →