Money makes the world go round as it helps you get all that stuff you need and want. But the money that does nothing is worth nothing. Over the years, cash will only lose its value if you don’t make it flow. And the best way to do that is to invest. That won’t only bring you more money but help you preserve your wealth in these uncertain times.
There are many different investment vehicles for all types of investors. But they all agree on one thing – placing your money in real estate is always a smart move. Of course, anyone with enough savings can invest in this asset, but that’s not something to rush in. And when you’re already researching your options, think about investing in commercial property.
The thing about commercial real estate is simple – it’s every real estate that you can exploit for some business. You can check out which establishments can be classified as commercial ones on this link. These buildings bring their owners a profit through capital gains or rental income. And the benefits of this business venture don’t end there.
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Great Business Opportunity
Commercial real estate is not reserved for big dogs only. ‘Ordinary’ people can also have their pieces of this profitable cake. Depending on how much you can invest and plan to exploit the property, you can opt for anything from malls and entire office buildings to industrial warehouses or single storage facilities.
The income stream you receive from your commercial property will increase over time. That’s because rental prices will go up as the real estate prices get higher. Furthermore, this real estate will provide you with equity and leverage for other assets. That makes it an ideal investment for small investors.
Before investing in this asset, consider the risks associated with it. You’re likely to face more risks than in a residential property. For example, chances of damage or accidents are way higher in commercial buildings than in single-family houses. Also, many people will utilize these premises, so they’ll wear and tear faster than homes and apartments.
High-Profit Potential
The number of reasons to invest in commercial property is vast. Deciding on this type of investment can diversify your portfolio, boost your income, and create significant wealth over the years. And if you’re ready to take on certain risks, you will face an investment with high potential.
A commercial building, warehouse, or office space can yield higher rental incomes than any residential property depending on the unit size and location. These properties can bring you several thousand or tens of thousands every month. That brings higher income but also more chances to invest further.
The residential real estate market is quite competitive, which is not the case with commercial ones. As a result, demand for these buildings is lower, especially in uncertain times. It m
Less Competition
eans lower prices, less competition, and more chances to get better value for money (i.e., better property).
You need to consider the size and location of the property to maximize your returns. For example, if you plan to rent out an office space, it should be located in a high-traffic area. Warehouses should be near the main roads and facilities like hotels or restaurants near the city area.
Tips on choosing commercial property are listed below:
Long Lease Arrangements
One of the most important reasons to invest in commercial property is its stability. Like residential real estate, commercial ones will also increase in value over time. Also, as most tenants sign up lease agreements for several years, you’ll have a stable income from rents.
The good thing about extended lease arrangements is that conditions can be more flexible. In addition, business owners will most likely not be late in paying rent or bills, as they take care of their reputation. Any claim may affect their business, so they usually adhere to the landlord’s rules.
Also, most business buildings can host multiple tenants. That gives you a steady inflow every month from different sources. It significantly reduces the risks that you will be left without this source of income at some point. Simply, the chance that all tenants will leave you at the same time is non-existent.
Help with Maintenance
Unlike residential real estate, investing in commercial property doesn’t require full ownership. Instead, most business owners agree on triple-net leases. It’s a type of agreement where tenants must pay for all ongoing expenses like maintenance, utilities, taxes, and insurance.
Besides, commercial tenants are more likely to invest in the property than residential ones. They need premises in good condition, so they’ll gladly put their effort, time, and money into necessary repairs, upgrades, and renovation. Due to their long lease arrangements, they are more likely to market the space and increase its value, and thus improve their business, too.
Tax Advantages
Despite the risk involved, the long-term investment in real estate can bring you some tax advantages. You can enjoy specific tax deductibles like value depreciation. It lets you write off a portion of your costs when buying any property for business purposes. In fact, that cuts down the amount of taxable income so that you can save a lot on taxes in the long run.
As Douglas Ebenstein explains, you can also avoid capital gain taxes if you opt to sell your commercial property at some point. For example, interests paid on borrowed money for the purchase, renovation, or repairs will be tax-deducted. Or the gain from property sale can be exempted if re-invested. It’s still best to talk to tax experts about this option as there are many nuances.
Commercial property is generally more lucrative than residential real estate. It can be a costly endeavor and not suitable for everyone. Yet, it can be a real deal if you look for something to preserve and increase your wealth over several years. So if you think of all the pros and cons, you’ll find commercial real estate worth investing in.