Commercial Property Disadvantages

913 Words4 Pages
Disadvantages of commercial property 1. Commercial property is susceptible to economic downturns. 2. The underlying costs may be high. 3. Commercial property can be tough to sell when values are declining, even when a fund is used. 4. Portfolio use 5. Due to the probable difficulty in selling commercial property holdings, commercial property is best used to expand your portfolio instead of as a core portfolio holding. Return expectations from commercial property There are two possible sources of investment return when it comes to commercial property. These are: 1. Capital growth: Capital growth refers basically to increases in the value of property. Capital growth has a tendency to be helpful in times of good financial growth; this can be uninteresting when growth is slow and damaging in downturns. Just as economic forecasting has a tendency to be a particularly undependable science, property price forecasting is likely to be unreliable and pose great differences of opinion. Gains and losses are to be expected, but may in the end even them out. 2. Rental yield: In due course, rental profit is likely to be a grander contributor to profits than capital growth, along with being significantly more dependable. In times when rental yields are great in comparison to government bond yields, it could be wise time to invest in commercial property. In Ireland and the UK, leases have a tendency to be long, normally for 10 or more years at the beginning. This means that the rental
Get Access