When it comes to residential real estate, the price of the property is generally determined by the person selling the property. Properties within the same area are priced according to recent sales of properties with the same features, size, etc. Then, adjustments are made to set the price.
On the other hand, in the commercial real estate market, the flow of cash is determined by the amount the investor is willing to pay for it. Simply put, if the yearly income from a specific property is $100,000 and investors are willing to 
pay $2M that makes the property actually worth $2 M to the investor. However, if another investor is only willing to pay $150M, then the property is only worth $150M.
Investors take into consideration a number of properties in a particular region in order to decide the amount of profit that can be made in that region. This is considered the capital rate. In addition, investors also consider the amount of risk involved. The worth of the property is determined based on risk and opportunity.
Prices Go Down, Profits Go Up
To draw in investors, the owner of the property needs to lower the property price, giving investors a higher rate of capital. As the prices decrease, the profit increases for the investor.
An important detail to consider when you are thinking about investing in commercial real estate is that the market is more stable than the residential market. Therefore, when the real estate market fluctuates and becomes unpredictable, you can rest assured knowing that your commercial properties will continue to bring in a substantial income no matter what the state of the current real estate market. When you are deciding how to invest, consider purchasing an apartment complex as your investment property instead of a single unit, and you will be amazed at the profit potential.
Property Options Australia
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Hi Sean,
I hadn’t actually thought of investing in commercial real estate. But, you make a good case for considering it as a serious investment strategy. I have no knowledge of this whatsoever though, so I have a lot to learn.
I find it really interesting that the commercial property market is actually more stable than that of residential properties.
When I think of commercial property, business and LIA sheds come to mind. I had never thought of an apartment block as a commercial investment. I do not know alot about this area but thanks for bringing this point to my attention.