Top 5 Reasons to Invest in Commercial Real Estate
August 17, 2017
Have you ever considered investing in commercial real estate? These are the top 5 reasons why you should:
Cash Flow - The best reason to invest in commercial over residential rentals is the earning potential. Commercial properties generally have an annual return off the purchase price of somewhere between 6% to 12% (depending on the market). This is a much higher range than the typical single-family investment properties (1% to 4% at best).
Equity - Historically, commercial real estate appreciates faster than other investments. This is especially true if you have the ability to make cost effective improvements on the property. As you make these improvements, you can then make your investment more appealing therefore increase the value of your asset.
Tangible Asset – Investing in Real Estate is different than buying shares in a company, where it may be here today, but out of business tomorrow. Real Estate a hard asset that while there might be ups and downs in its valuation, the property itself is not going to disappear.
Leverage - The best way to add wealth is to find a way to use your assets as leverage. In Commercial Real Estate, this means that you can place debt on the property that is significantly higher than the initial investment. This allows you to purchase even more with other people’s money.
Tax Benefits - Very few investments offer tax benefits. However, real estate is one of the exceptions. The biggest two benefits include the mortgage interest deduction and the depreciation deduction. Both of these deductions can help offset your income stream and lower your tax bill. However, always work with a qualified tax professional that understands real estate to get all the benefits while avoiding costly tax mistakes.
Making smart purchasing decisions is very important. By choosing the right properties to invest in, you can gradually build your real estate portfolio while earning passive income. If you have any questions regarding Commercial Real Estate or would like to start the discussion of diversifying your assets, please do not hesitate to contact one of our Advisors for more information.