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The answer to this question depends on your reasons for purchasing a home and your goals for your money and investments. Buying any property requires a significant cash outlay. Like every other investment option, its value may increase or decrease depending on the economy. Traditionally, owning a home has been a means to build wealth, and many see purchasing a home as a sign of success. A home is a place to put down roots, and because homeowners are not subject to rent increases, lock in some of your living costs. While most hope that the value of their home will increase, they are not inclined to think of their home as a profit-seeking investment. People commonly see houses as places to live unless they purchased them to rent them out.
But current housing costs and financial insecurities have made purchasing a home unachievable for many. Their money would have better returns if invested elsewhere. There are just better options for investment, even in other types of real estate.
Commercial Real Estate Investment
Many options and factors are involved in commercial property investment and real estate. You can explore these options when you realize that there are different kinds of commercial real estate ranging from apartments to stores and even clubs. Real estate was not as volatile twenty years ago compared to the present day.
Real Estate investment opportunities for least risky to most risky are:
- Apartments
- Retail
- Office
- Industrial
Because people have to live somewhere, apartments have always been the least volatile form of commercial real estate. Retail stores were the next in the line. However, in recent years, the risk of investing in retail stores has increased due to inflation. In an interview with Stevie Johnson on The Crypto Show, Collin Plume (My Digital Wallet) talked about the similarities in the risk involved with investing in office space when compared with retail space. So similar that the gap between retail and apartments in terms of returns has increased exponentially. He said that investing in apartments is very conservative and that retail is becoming riskier because of online businesses like Amazon, reducing the need for retail space.
He mentioned that office rentals had been and continue to be affected by the pandemic. Now that companies and individuals have realized that they can work from home, there hasn’t been as much need to buy or rent office spaces. His exact words regarding the issue were, “there’s no need to go back in.”
Buying Commercial Property for Investment
When buying commercial property for investment, investors need to study the environment and determine what kind of property will thrive in the location. Buildings, formerly used for industrial or office purposes, are now being turned into apartments because there is a greater need and desire for those types of properties. Rental apartments provide a greater return on investment than trying to rent or sell industrial or office spaces.
Property owners have another option to consider when making their real estate more attractive to potential renters of apartments, retail spaces, and office spaces. They can make the property more attractive by adding luxury items like high-end restaurants and gyms. The aim is to get more people to return to the offices by including services or conveniences that serve as incentives. It is still unclear whether this option would work. Access to these has become less critical as people have adapted to working from home. Further study and experimentation will need to happen to determine what it will take to motivate people to return to an office every day.
Residential vs. Commercial Property
Homes are not suitable investments compared to commercial properties because people buy homes is to protect themselves against inflation. You are less likely to profit from a single unit than when you invest in multiple units such as an apartment building. Therefore, single-family homes are not good investment options. Single-family homes aren’t the best way to go if you want to make a serious profit from real estate.
Conclusion
Because single-family homes have a low return on investment and because in many geographical areas buying a home is financially prohibitive many investors are opting to invest their money elsewhere. However, some real estate investment opportunities come with lower risks and greater profitability. It is essential to look at all the risks involved before investing in real estate.
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