Investing In Commercial Real Estate as Shared by CRE-Finance LLC
What are the Benefits and Risks of Investing in Commercial Real Estate?
Online, April 27, 2014 (Newswire.com) - One of the main attractions commercial real estate offers is security, even if the economy may slow down. Commercial property grows in value when the economy is strong and provides steady income. The mortgage professionals at CRE-Finance LLC want to share what the risks and benefits associated with investing in commercial property are.
Benefits of Investing in Commercial Property
Strong Returns
For starters it provides strong and reliable returns, in both income and capital form. Investment in commercial property is not about quick gains, but over a period of time, it is a means to obtain solid return which may usually be above inflation.
Stability of Returns
Commercial property provides stable returns as well as being higher. Commercial property leases last for a longer time as compared to residential property leases. You may be looking at income for the next 3 to 10 years if you invest in commercial property.
Generous Tax Benefits
Investing in commercial property will present you with tax benefits. You can benefit from depreciation allowance on plant equipment, air conditioning and other things, and this is just one part of the benefit. Handy building allowances is the other part of generous tax benefits you can receive by investing in commercial property.
Ability to Add Value and Increased Control
Owning commercial property gives you a significant control over your investment in areas such as renovation, upgrading, change of use of property, redevelopment etc. while all these things also lets you add value to your property.
Risks of Investing in Commercial Property
Health Risk from Older Property
Commercial property, which is older, may pose health and safety risk if one decides to invest in it. One example is of the asbestos risk, which has been identified s hazardous to the residents who occupy commercial property, especially, that which is older. It is important to verify that the property complies with health and safety codes and there is no risk of pests and other infectious diseases.
Tenant Generated Risk
When it comes to mitigating tenant related risk, far sightedness, caution and people skills are necessary. You need to ensure that to whomever you will lease out your commercial property to is a trustworthy tenant who will pay you on time. Since lease agreements for commercial properties are for a longer time period, it might be difficult to terminate it beforehand. You do not want a tenant who may have high-risk businesses, which could affect your returns and property value. Also for you to lessen your exposure to liability, a strong lease agreement may be required.
Considerable Time Until You Can Reap Benefits
One other risk associated with investing in commercial property, is that it may take you considerable time before you start reaping the benefits from your investment. Commercial property takes time to be set up, from purchasing to remodeling, it may be years before you are all set to lease it out to a third party. You have to be farsighted to reap the benefits from this type of investment and think of returns in the long term. This means evaluating the economy and trends for the next 5-6 years at the most before you step into investing in commercial property.
If you have any questions regarding commercial real estate or are seeking financing, then contact Todd Tretsky at 212-851-6926 or Rich at 212-257-7307 or visit us at www.cre-finance.com.