THE TROPHY IN REAL ESTATE INVESTING
One of the hallmarks of commercial real estate is its ability to produce income through the cash-flow of the property, defined as: Rent – (Operating Expenses & Debt Service). Unlike most stocks, which have to be sold to produce actual cash to the investor, CRE is partially defined by its ability to pay out regular cash distributions during the active ownership of the property.
Asset value correlated to net operating income (NOI): This is the single greatest reason why an investment in commercial real estate is fundamentally different from other asset classes. The fact that the value of a commercial real estate property has intrinsic correlation to its net operating income means you can make (or lose) money in a deal regardless of what the greater market is doing. This is accomplished primarily through securing solid, long-term leases with credit-worthy tenants. This gives commercial real estate stability through a potentially volatile market; and give the investor greater control of its investment product through the management / leasing process.
