Making your first second tenth

Investment

Commercial real estate stands out as a secure investment avenue within the realm of real estate due to several key factors that contribute to its stability and potential for long-term growth.

Control

Tangible Asset with Intrinsic Value

Commercial real estate represents physical properties such as office buildings, retail spaces, or industrial facilities, offering investors a tangible asset with inherent value.

  • Direct Control of the Investment
  • Reliable Investment Regardless of Market Cycles
  • Diversification
Financial planning

Optimize your Income Streams

Long-term lease agreements and rent increase provisions ensure a consistent cash flow for investors, with commercial leases often including provisions for periodic rent adjustments to counteract inflation.

  • Triplenet Leases to Protect Returns
  • Potential for Appreciation
  • Tax Advantages for investors
  • Use Leverage for Wealth Accumulation
 
Performance Consistency

Hedging Against Economic Uncertainty

Commercial real estate investments serve as a hedge against economic uncertainty, as businesses often lease commercial spaces during economic downturns.

  • Shift Operating Expenses to Tenants
  • Low Correlation with the Stock Market
  • Spread Investments Across Property Types

Calculated Risk and Leverage can accelerate Investment Returns

Example

Levered vs. Unlevered Cash: Investment $250,000

Consider the purchase of a commercial property for $1,000,000

The investor has been approved for a loan at 75% LTV ($750,000), which means that he or she will need an equity investment of $250,000 in the levered scenario.

9.89%

10 Years IRR - Unleveraged

12.44%

10 Years IRR - Leveraged

Levered vs. Unlevered Cash Flow and Return Calculations

The key point is that unlevered cash flow is the cash produced by a property before any loan payments are made. Unlevered cash flow is helpful as a means for comparing the operational success of multiple properties. Without any leverage, the internal rate of return and cash-on-cash return will be lower.

Levered cash flow measures the amount of cash a property produces after operating expenses and debt service. In a levered scenario, the upfront equity contribution and the annual cash flows are lower—but the overall returns are higher. 

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