The Unique Benefits of Commercial Real Estate as an Investment

You may think of commercial real estate as something to be bought by business owners who are looking for office, retail, or warehouse space needed to run their business operations. Or perhaps as an investment bought by a professional real estate investment firm.

While that is often the case, investing in commercial real estate is much more accessible to most people than is often realized. Commercial real estate makes a great investment for business owners, professional firms, and the individual part time investor as well.

Commercial real estate has several great advantages for the average investor, and when a proper investment is made it can greatly increase the net worth of the buyer.

Commercial Real Estate Provides Excellent Cash Flow

Most commercial real estate properties can be rented out at rates that will pay for all expenses, cover the mortgage payment, and still leave an excess amount of monthly cash flow that can go back to the investor or saved for future investments. There really are no other investments that cash flow as well as commercial real estate.

Commercial Real Estate Always Appreciates Over Time

In addition to the monthly cash flow, commercial real estate always appreciates given a long enough time frame. The stock market may appreciate as well when taken as a whole, but individual stocks can and do lose value that they never recover. With commercial real estate, if an investor buys a property today, it is a virtual guarantee that it can be sold for a profit later.

Commercial Real Estate has Great Tax Benefits

Unlike investing in the stock market, real estate actually lowers your tax burden as you are accruing profits. Unlike stock market investments, commercial real estate is considered a capital asset, and thus can be depreciated on your income tax filing every year.

The details are a bit more complex than that and you will probably need to have your taxes prepared by a professional, but overall investing in real estate is much more tax efficient than any other type of investment.

You Can Safely Use Leverage When Investing in Real Estate

Most real estate transactions occur with the help of a lender. In order to invest in real estate, the investor usually does not pay cash for the entire amount of the property, but only has to make a small down payment and then uses a mortgage to cover the rest of the cost.

This allows an investor to control a much larger amount of capital than they could with a stock market investment. In the stock market, an investor can buy stocks on margin, but the problem with that is that if the market declines, the margin can be called, forcing the investor to sell at the very bottom.

With real estate, if property values do decline, as long as the mortgage payment is still made, the bank will not care and the investor simply waits until values rise again.

Real Estate is a Great Inflation Hedge

While no one wants to lose money in any investment, it is often the case that values of assets decline in high inflationary environments like we are in now. Real estate as an investment actually provides a great hedge against inflation. While inflation may cause property values to rise, historically rents tend to rise faster than almost any other prices.

As inflation and the associated higher interest rates price many out of the market, for those who have already invested rents will typically outpace all other price increases.

The bottom line is that investing in commercial real estate is much easier than many people realize, especially with the help of a qualified broker on your side. Not only that, but it is often the best investment in one’s portfolio. If you would like to learn more about how you can benefit from investing in commercial real estate, feel free to give us a call and find out more about how we can be of service.