Commercial real estate is an increasingly popular investment asset for those seeking passive income and diversification of their portfolio. Like a growing number of platforms, addy offers investors a chance to put money towards an asset class that is traditionally difficult to get involved in, partly due to high price tags that create a barrier to entry.
Today, crowdfunding real estate platforms like addy allow the average Canadian to invest in this potentially lucrative asset class. Here’s why investing in commercial real estate is worth considering.
What is commercial real estate?
Commercial real estate, abbreviated as CRE, refers to properties that are used for business purposes. CRE stands in contrast to residential real estate, which include places where people physically live. CRE includes apartment complexes, hotels, warehouses, business parks, mixed-use buildings as well as purpose-built rentals and affordable housing developments.
addy specifically invests in institutional-grade commercial real estate properties, which come with high price tags, often in the tens of millions. That’s a lot of money for one person to have on hand to invest, so addy uses crowdfunding to lower the threshold to investment. Members can invest anywhere from $1 to $1,500 towards a CRE property.
It’s important to note that addy does not invest in single-family homes and individual condo units. The average Canadian individual, couple and family is struggling to find a home as prices skyrocket and alongside increasing demand and low supply, which would be made even harder if a company like addy is competing with them. Instead, addy focuses on opening up this previously inaccessible real estate investment opportunities. This means you can invest easily knowing that you are not making it harder for Canadians to find their forever home.
CRE investment benefits
By investing in CRE properties, you’ve a chance to earn passive income. CRE properties are generally long-term investments that don’t come with a lot of risk of volatility or market fluctuations, especially when compared to stocks. It’s also not as speculative and erratic as cryptocurrency. Instead, real estate is one of the oldest investment classes. And because physical property is a finite resource, as supply decreases, demand increases.
CRE properties often primarily earn money through rental income. Whether your tenant is a business or residents of the building, there is a potential for monthly income via rent. You can also make money through the sale of the property.
While there is a lot of upfront money required, there are more avenues to acquire loans for investments. Banks aren’t going to lend money if you just want to invest in stocks, but they might if you want to buy real estate. Similarly, you can use your property investment as leverage for future projects.
CRE investment drawbacks
Of course, there are some potential disadvantages to commercial real estate properties worth considering too. As a landlord, you are responsible for tending to property issues and needs, such as management and maintenance. What’s more, it’s important to lease to and maintain quality tenants that consistently pay rent.
Additionally, this asset is generally illiquid, which means it’s not easy to buy and sell. Unlikely stocks, you’re not putting your money in and taking money out as needed. Once you invest, your money could be tied up for years.
There is also a lot of due diligence, time and energy required for commercial real estate transactions to take place. This makes it difficult for the average investor to get into the industry. Unless you’re an addy member.
Investing with addy
addy works to diminish some of the drawbacks of investing in CRE, notably the liability and work involved. Through crowdfunding, members can invest a smaller amount of money that they feel comfortable with. There are no hidden fees, so every dollar of the invested money goes right to the investment.
While the money may be tied up for some time, addy provides all members with a detailed plan that includes when money is expected to be returned to your wallet, how much may be returned and how often we think it’ll happen. Properties like our Starbucks have seen distributions for four quarters in a row.
addy members don’t need to bother themselves with any management or maintenance either. There is a trusted General Partner leading the investment who is involved in all that work; addy members can just invest and then kick back.
Only members can invest in properties and enjoy all the benefits of investing in this asset class, so sign up for your shot at commercial real estate investments in Canada.