Key points regarding why investing in commercial real estate is a great option.
Three Reasons Why You Should Consider Investing In Commercial Real Estate
The investment game keeps changing and any good investor knows that instability is part of the game. Among the major investment options, you have stocks, bonds, and real estate. There is much volatility in stocks and only refined investors can survive this game. However, commercial real estate has maintained a reputation of stability and higher returns when compared with other investment options.
Just to offer brief introduction, commercial properties are those, which provide office space rather than a living space. Commercial properties include restaurants, shops, malls, and office buildings etc. Here are three reasons why you should consider stepping into commercial real estate:
1. Higher Potential for Returns and Income
When you invest in commercial real estate with a sound investment strategy, it can significantly benefit you as it carries long-term lease. You can benefit from unlimited income. With a great business plan, you can build long-term security of high returns. You can either purchase a commercial property with multiple floors and rent some of those to gain additional income, or you can purchase it, let it build equity, and sell it later with a profit. You can also rent your property to start a stream of passive monthly income.
Additionally, commercial real estate helps diversify risks, for example if you own 10 shops in a mall and lose one tenant, all you will lose is 1/10th of your income from that property as compared to losing a tenant in a single family house and losing the entire rent.
2. Provides Leverage and a Different Appreciation in Value
When you purchase a commercial property, you are bound to improve it and make changes to it. As you make improvements, the value attached to your commercial property grows, and you can borrow against it. This can allow you to quickly be in a position to hold several properties by borrowing against improved equity. Value of a commercial property escalates differently than how it does on residential properties. The value of your commercial property which you have newly acquired can increase significantly even with a small increase in revenue from that property. Other factors like the progress of economy also affect the value of properties. Investing in countries where economic growth is high is recommended.
3. Diversification and Tax Reduction
Owning a commercial real estate property gives you the diversification needed in your portfolio, along with the advantages of a regular long-term income stream and tax benefits. Owning a piece of commercial real estate means, you have a variety of options to lay your hands on a piece of land, from an office space to an apartment building.
You can also go beyond national borders to invest in property. Commercial property also provides generous tax benefits. One of the major benefits include depreciation allowance on plant equipment within the building, for example, air conditioning, carpets, lighting etc. Most commercial properties enjoy a significant building allowance as well.
Investing in commercial real estate is an ideal choice for investors looking to diversify their portfolios. A commercial property, if handled correctly, can turn out to be a gift that keeps on giving.