What’s the Deal with Mall Real Estate Investments?

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While plenty of people enjoy shopping in malls, the rise of online shopping has many wondering if these shopping centers will survive the digital age. While it’s clear that online shopping has had an impact on malls, some mall owners are choosing to invest in their centers in an effort to boost foot traffic and sales once again. But are these efforts likely to be successful? In this article, we’ll examine what’s happening with mall real estate investments and offer some predictions about the future of malls as shopping destinations.

The Future of Shopping Malls


Malls have changed a lot in recent years. As online shopping grows in popularity, brick-and-mortar stores are closing at alarming rates. This has caused some malls to close or begin leasing space to non-retail businesses in an effort to make money and survive. Many investors have taken note of these trends and begun looking for mall properties that may be up for sale.

The Pros and Cons of Investing in Shopping Malls


Investing in shopping malls isn’t a sure bet. If you don’t know what you’re doing, you could wind up losing your money. However, if you understand how to manage your mall property and find reliable tenants to fill it, then it can be a good investment option. Here are some pros and cons of investing in mall real estate: + Malls have been relatively recession-proof; demand for retail space has not dropped substantially since 2008.

Calculating ROI


In any investment, it’s always important to look at what you’re getting out of your money. Calculating a return on investment (ROI) helps you do just that. The formula is fairly simple: take your proceeds from an investment and divide it by how much you initially put in. For example, if you invest $50,000 into a mall property and sell it for $60,000 after two years—and assuming there were no costs associated with buying or selling—your ROI would be $10,000 divided by $50,000 ($0.20). That means you earned 20% off your initial investment—not bad! But remember: when calculating ROI for real estate investments like malls or shopping centers, make sure to factor in all costs involved with making such an investment. For example, if there are hefty capital expenditures involved or if sales taxes are due upon sale of a property , these amounts should be subtracted from your overall profit figure before coming up with an ROI percentage.

How much can you expect to make?


You might be surprised to learn that most investors don’t make money in real estate. At all. In fact, of all large commercial properties bought and sold in 2014, only 33% went for a profit. There are many reasons why—primarily because so few people understand real estate investments well enough to buy correctly—but it boils down to risk: Most people simply don’t know how to properly evaluate a property or a deal before they buy. The good news is that you can earn much more than average if you do your homework and find undervalued properties with great potential for future appreciation.

Finding Undervalued Properties


As a mall real estate investor, you have options when it comes to finding undervalued properties. One way is to find an out-of-the-way shopping center in your local area and snap it up as an investment. This might mean buying something that’s sitting vacant or, if you’re lucky, one that has a struggling business occupying part of it. Another option is to buy into a multiplex and make sure you end up with all or most of the units. Then there’s always flipping—buying properties at auction (both foreclosures and short sales) or through private sellers at a discount before flipping them for more money.