Why Commercial Real Estate

BENEFITS OF REAL ESTATE INVESTING

CASH FLOW

Properties earn rental income from tenants. The more stabilized the property or higher its occupancy, the greater the chance of a steady and predictable stream of cash

 

INFLATION PROTECTION

Over the long-term, real estate may provide a hedge against inflation, since property values and rental income typically increase during periods of inflation

 

DIVERSIFICATION

Real estate can provide diversification within a portfolio of traditional investments such as stocks and bonds

 

MORE THAN JUST DIVERSIFICATION

While the real estate market can fluctuate, it has been demonstrated over time to be less volatile than some other asset classes. The potential for this stability can be a distinct advantage to investors.

APPRECIATION AND INCOME

Historically, real estate investments have offered a path to wealth through property appreciation and generation of regular income. On the RealtyMogul platform, we strive to offer both paths, with Private Placements and Real Estate Investment Trusts («REITs»).

 

PURSUING SMART INVESTMENT ALTERNATIVES

Forward-thinking investors deserve smart alternatives outside the volatility of the stock market and public exchanges. Real estate may provide a solution.

 

Property Type

Description

Advantages & Disadvantages

Multifamily

Residential buildings that vary by location (urban or suburban) and may be further classified by structure: high-rise, mid-rise, or garden-style.

Economic drivers include demographic trends, home ownership, household formation rates, and local employment growth. Leases are typically short term and adjust quickly to market conditions. Generally considered to be one of the more defensive investment types within commercial real estate, though they are still subject to competitive pressures from newer construction.

Retail

Everything from small shopping centers, strip malls, and outlets to large power centers with a «category-dominating» anchor tenant.

Most broadly influenced by the state of the national economy generally, especially such indicators as employment growth and consumer confidence levels. More local factors include the property location and its traffic flow; population demographics; and local household incomes and buying patterns. Leases also often have long terms, which means that after a while lease rates may lag current market rates, and step ups may need to wait until lease expirations.

Office

Range from high-rise multi-tenant structures in city business districts to mid-rise single-tenant buildings in suburban areas.

Rents and valuations are influenced by employment growth and a region’s economic focus. Individualized tenant improvements are usually not very involved, but credit quality of tenants is key; re-leases of office space typically require some lead time to consummate. Office properties often have longer-term leases that can lag behind current market lease rates, so that significant «step-ups» or «step-downs» of rental rates may occur when leases expire.

Industrial

Manufacturing facilities, warehouse and distribution centers, research & development (R&D) properties and flex-space.

Manufacturing and R&D properties tend to be build-to-suit buildings that can be difficult to «re-tenant» without extensive modifications, while warehouses and distribution centers can be more generic buildings. Industrial properties are also influenced less by local job growth more than by larger economic drivers such as global trade growth (imports and exports) and corporate inventory levels. As with office buildings and retail centers, industrial property leases tend to have long terms, so that over time lease rates can fall behind «market.»

Other

Self-storage facilities, mobile home parks, student housing and hospitality.

Key drivers include demographic trends, the state of the national economy in general, and large macroeconomic drivers such as supply/demand.

INVESTMENT STRATEGIES

Each of the three primary categories of real estate investment strategies has its own risk and return characteristics.

 

CORE

Properties that are stable, fully leased, well-located and typically Class A. Lower risk and lower reward, with low leverage, if any.

 

VALUE-ADD

Lower occupancy or secondary market locations with an opportunity to increase value through renovations or repositioning. Medium risk and reward with low to medium leverage.

 

OPPORTUNISTIC

Typically raw land or ground-up development with little to no near term cash flow. High risk and high reward with high leverage.

 
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