If you have capital that you’d like to put into an asset, there are various options to consider. You could invest in stocks, where you can get a higher return on your investment. However, this potion is prone to price volatility. You could take advantage of the relatively safe bonds market where the returns are constant, yet have limited advantages. Or, you can invest in commercial real estate.
Investing in commercial properties can deliver the appreciation and stable returns that most people are after, even when the market isn’t good. So, whether you want to invest in an office space, a self-storage facility, an apartment complex, or a warehouse, the following are some reasons why you should add commercial property to your portfolio.
Current Income and Cash Flow
One of the biggest advantages of investing in commercial real estate is that it offers regular income that can surpass other investments. And if you buy a property that has room for tenants, you can get additional cash flow.
However, it is crucial to note that having tenants on your property will involve some management responsibilities that might prevent you from doing some core business tasks.
Therefore, it will be best to get the help of a commercial property management company.
Equity
Commercial property can allow you to accumulate substantial equity through leverage. Investing in commercial property will also give you the ability to place debts on the investments, meaning you can purchase more properties for less money and greatly grow your equity as you pay down the loans. This will provide you with greater flexibility to manage the growth of your business and more retirement options.
Tax Advantages
Unlike any other monetary product, commercial real estate has several benefits when it comes to taxes. Commercial property can provide you with faster depreciation to interest deductions and tax advantages for your inheritors. All of these advantages can result in a huge return difference, particularly in the long term. Therefore, consult your tax advisor to understand more about the tax benefits available for you.
Inflation Guard
Commercial properties are tangible assets and can offer excellent protection against inflation. There are several ways a commercial property can protect you from inflation. You can achieve positive property values due to rising inflation that contributes to a rise in rents while the operating expenses stay the same. This will then increase the net operating income that will later appreciate your property values. The increase in value tends to move with inflation, making commercial real estate investing a good inflation hedge.
Diversification
Commercial property can offer diversification across assets and locations. This will allow you to add more investments to your portfolio. Also, by diversifying your portfolio and capitalizing on several commercial properties, you will be playing a great role in protecting your income stream and managing risks in case of an economic recession.
Tangible Asset
Real estate is a hard asset, unlike financial products that can be of value one day have and no value the next day, commercial real estate has an inherent value from the land and buildings. This hard asset can be used to produce other services or products, which is shown in the price of the property.
Bottom Line
Commercial property is a good investment opportunity. However, you must make sure that you do enough research about the area where you want to establish your property, and whether there will be any demand for it. Ensure that the location is right, the building’s layout is correct, and the rent is not too high to enjoy the above benefits.
