Top Ways Commercial Real Estate Investing Differs from Other Investment Portfolios

 September 27, 2018

By  Guy Gray

Wouldn’t it be nice if all investments were low risk, high return and required little or no work? Unfortunately, that’s not reality. As Warren Buffet once said, “if past history was all there was to the (investing) game, the richest people would be a librarian.”

Investing requires much more than knowledge of past history. You have to analyze trends, sure, but you also have to put in some hard work and often react quickly. Additionally, you have to tailor your strategy depending on the type of investment you’re pursuing. Take commercial real estate, for example. Should you treat your CRE investments the same way you would the stock market or other physical assets?

Due to its dynamic nature and trend-driven market, commercial real estate investing differs from most other investment portfolios. Read on to discover its advantages and disadvantages, as well as how commercial real estate software can help.

The Advantages of Commercial Real Estate

  • It has a high upside: You’re dealing with properties that have a high earning potential. According to Nolo, “commercial properties generally have an annual return off the purchase price between 6% and 12%, depending on the area, which is a much higher range than typically exists for single family home properties (1% to 4% at best).”
  • Limited unprofessional behavior: With stock markets or residential real estate, you’re more likely to run into people who don’t behave in a professional manner. You’re dealing with business owners, not individuals looking out for only themselves.
  • Prices are based on data-driven trends: There are distinct commercial real estate trends that are based on real numbers. While it can be easy to overreact to these trends, having commercial real estate software that will help you analyze the data can help you make smart decisions.
  • No after-hours fluctuations: While the stock market can fluctuate between opening and closing times, commercial real estate has more set business hours and is therefore more predictable.

The Disadvantages of Commercial Real Estate

  • It’s high risk: It’s only natural that since there is a high upside or reward with commercial real estate, there’s a high risk as well. Not just because you’re dealing with high-value assets; you’re also investing in a property that is susceptible to risk brought on by elements like natural disasters or the people utilizing the space on your property.
  • There are significant costs: You can expect to invest large amounts in commercial real estate, both initially and whenever there is a costly repair or required upgrade.
  • It requires a bit of work: From juggling work orders to reconciling information and documents for taxes, there are several clerical tasks that can take up your day.
  • It’s tough to do on your own: If you’re a landlord, you’re likely going to outsource your maintenance and repair tasks to professionals. You also might need the assistance of a tax professional. Either way, CRE investments require more outside help and collaboration than many other types of investing.

Managing Your Investment with CRE Software

The good news is that software like Quarem can help with all of the disadvantages of commercial real estate and let you focus on its advantages instead. With data-based reporting, time-saving automation capabilities and a team of experts available to support you, you’ll be able to free up more of your day to make data-driven decisions for the betterment of your CRE portfolio.

Want a solid investment? Consider commercial real estate software.Click here to request a demo of Quarem today.

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About the author 

Guy Gray

Guy Gray serves as Chief Operating Officer overseeing our technology and client services teams. He is responsible for guiding Quarem application development, networking and security, as well as new client implementations.

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