Commercial real estate is fast becoming a popular investment tool for average Americans trying to build their retirement nest egg. What was once reserved for institutional investors or the ultra-wealthy, commercial real estate is now a realistic investment option for those who think it is out of their reach. Here is a look at the state of today’s commercial real estate investment environment.
Eliminating Traditional Barriers
As little as a few years ago, it was very difficult for the average investor to enter commercial real estate investing. Without a high-net-worth, plenty of cash and the right connections, it was next to impossible. Today, technology is totally changing those perceptions. From startups to crowdfunding platforms to artificial intelligence, many Americans now have access to an exclusive market that was once reserved for a select few. The “old-school” way of thinking about commercial real estate is gradually starting to fade as more individual investors are using it to build their retirement portfolios.
Smashing Common Misconceptions
Today, investing in commercial real estate is not as expensive or as risky as many people once perceived. Technology is smashing many of the common misconceptions associated with commercial real estate. Investment opportunities exist today for millions of accredited investors who only need a small investment to get going. Many startups and investment management companies work exclusively with commercial real estate, and in many cases, a team of professionals handles the investments from start to finish.
Every investment involves risk, and commercial real estate is no different than investing in the Dow Jones Industrial Average or the S&P 500. 401(k)s are not immune from risk, and many average investors lost their entire retirement savings during the financial crash of 2008. Additionally, the returns on commercial real estate have outperformed the S&P 500 by 9.5 percent over the last 20 years.
Many people think commercial real estate is more of a long-term investment that ties up money for years. Not too long ago, it did take years before most investors saw any returns. However, the technology available today was not available back then. Many investment companies exist today that offer short-term returns of 10 percent or more annually. Additionally, the returns on commercial real estate averaged 7.2 percent over the past 20 years compared to an average dividend payment of 2.6 percent from stocks during the same period.