Commercial real estate investment is considered time and time again as a sound investment that offers a constant return. While the stock market shows unexpected volatility, and less risky assets continue to offer little or no return on investment, real estate continues to be a favorable investment option for investors who desire to place their profits in excellent reward profiles.
Commercial real estate properties continue to offer various opportunities to earn valuable return in a variety of different forms. Investors have the option to purchase the property, rent it, or use for their own business operation while leveraging on the increased value of the property. With the help of expert property appraisers, you can judge the potential increment in the properties and make a intelligent decision.
Investing in commercial real estate is a logical way to enjoy tax benefits, diversify your portfolio, and create wealth at the same time. However, it can be a risky decision pertaining to many external factors. Taking plenty of time to do thorough research and seeking the advice from commercial real estate appraisers will help to understand the underlying risk and benefits of your decision.
Why commercial real estate investment is considered as a sound choice?
Higher income potential: Commercial real estate has the potential to earn higher income, in terms of rent, lease payments, or increased appreciated value, than residential real estate, thus offering you a chance to earn more income. Also, commercial properties are appreciated at a higher rate of return, thus increasing the earning potential of the investors.
Tax benefits: Holding onto a commercial real estate or investing into one can offer you a significant tax benefit by the way of depreciation of the building. Repair interests involved in it are also tax deductible. Discussing with your tax advisor can you help you ascertain the tax implications of your investments.
Tax-free cash flow: As mortgage interests (if you have taken a loan for buying commercial property) and depreciation are considered as tax deductions, the cash flows via rent or other receivables are generally tax-free. However, it will be critical to design your tax planning taking into consideration future capital gains on the sale of the property.
Triple net leases: Triple net leases are quite common with commercial properties. There are many variations of it, but in general terms the property owner does not partake in any expenses incurred in maintaining the property. The lessee handles all expenses related directly to leasing the property, including real estate taxes, property insurance, maintenance costs, over and above the lease payment. Thus, except mortgage costs, the investors do not have to incur any extra cost towards maintaining the property.
Unified interest: Retail commercial tenants have as much interest in maintaining the property as you, as they have a vested interest in preserving their storefront and store to increase their business. As a result, the interest of tenant and owners are united, which ultimately helps the owner to improve and maintain the quality of their property, thereby appreciating the value of the property.
Capital growth: By investing in commercial real estate property, not only you will be able to gain capital benefit in the long term with a raise in property value, but with a steady rental income every month, you can benefit from regular income and strengthen your cash flow in both short and long term.
It is vital to obtain advice and seek the help of real estate valuation experts, to guide you through the intricate process. It will help you to eliminate any risk and gain long term benefits.