The purpose of any investment is to bring in returns. The case is not different with investing in a commercial real estate since it also brings in profits. What’s more, there is an element of pride that comes in knowing that you own a property that is producing income and that is contributing to nation-building.
Besides, commercial property will always be there since it is a tangible asset unlike investments such as stocks in which a company can be dissolved later.
The commercial real estate comprises of land or buildings that are meant to generate profit either from renting or through capital gain. In this category, you will find office buildings, retail stores, malls, multifamily buildings, industrial property, farmland, warehouses, hotels, and land.
Some of the reasons why you should consider investing in a commercial real estate are:
Less risky with higher income and includes tax benefits
The commercial real estate has a regular income since leases secure it, making it less risky than other investments that depend on unpredictable income. The income is also higher than what other investments such as stocks would yield, with the annual return being somewhere from 6% to 12%.
Investing in commercial property can help you to lower your tax bill since you can benefit from depreciation deduction and mortgage interest deduction. This is unlike other investments, which do not offer tax benefits. Just remember to use the services of a tax professional who understands the tax benefits you can get in real estate.
Appreciation in value
Investments in commercial real estate appreciate in value over time. This can be due to imbalances in supply and demand or if the property has cost-effective improvements that affect its desirability and usability. You can make improvements to the property, make it more desirable and appealing, and therefore increase its value.
Also, the commercial real estate has significant intrinsic value in that both the land and the structure have value. If you can choose the asset and the location wisely, you can rest assured of an income. As such, investments in commercial property do not fluctuate with similar volatility as that of the stock market.
Leverage the asset and better hedge against
You can acquire debt that is a number of times more than the original equity on a commercial real estate. This way, you can acquire more assets with the money and increase your equity as you pay the loans.
When you acquire more assets by borrowing more than your commercial real estate is worth, you are adding wealth using other people’s money.
Also, you can place a positive leverage on a commercial property investment whereby you borrow money at a lower cost while the property has a higher return.
In comparison with other investments such as corporate bonds, stocks, and treasuries, commercial real estate have a better hedge against inflation. During inflation, the price of the commercial property also rises.
Higher returns, appreciation in value, better inflation hedge and ability to leverage the asset makes commercial real estate attractive to most investors. However, if you feel unprepared to dip in the waters of commercial real estate investments, you can always use the services of an experienced realtor such as liveloveathome.com that can help you to acquire your dream commercial property.