Why Invest in Commercial Real Estate
There are plenty of ways to invest in property. You can rent out properties, consider dabbling in real estate investment trusts, flip houses, or be part of crowdfunded deals.
Whether you have a long history of investing in residential or commercial property or you have never invested before, here are seven reasons why you should think about investing in commercial real estate.
7 Good Reasons to Invest in Commercial Real Estate
1. Profitable Income Potential
The most significant reason why people invest in real estate is due to the income potential. You can rent out an entire house or apartment or simply add on an ADU (accessory dwelling unit) or granny flat to your existing home and rent that out.
Larger commercial buildings like office buildings or apartment buildings can yield even higher returns on investment.
By renting out rental properties, you can make thousands of dollars each month if you have selected the right properties. Increased profit margins can even help you to build your portfolio faster when you choose to invest them in new properties as income rolls in.
2. Tax Benefits
You can benefit from tax deductions on things like cash flow from investment properties, operating costs and expenses, mortgage interest, depreciation (despite a property gaining value), insurance, and other benefits.
Individuals who invest in real estate make tons of cash through rental income, appreciation, and profits created from property-dependent business activities.
The value of real estate tends to increase over time, and with a solid investment, you can easily turn a profit once it is time to sell. Rents also increase over time, which means an even higher cash flow.
4. Building Wealth and Equity
When a property mortgage is paid down, equity is built which is an asset that is part of your net worth. As you build equity, you obtain leverage to purchase more properties and subsequently boost your cash flow as well as wealth even more.
Leverage means using various economic instruments or borrowed capital (for example, debt) to boost the potential return of an investment. A twenty percent down payment on a mortgage, for instance, can get you one hundred percent of the home you wish to purchase – which is referred to as leverage. Since real estate is considered a tangible asset as well as something that can be used as collateral, financing is not a problem to come by.
6. The Value of Real Estate Keeps Increasing Over Time
It has been proven over and over from history that the longer you hold onto the property, the more profit you will make. The housing industry has always recovered from past hiccups that resulted in home appreciation falling. And for those who managed to hold on to their properties during perilous times, prices have returned to their former state, and appreciation is back where it was.
7. Inflation Hedging
The inflation hedging aptitude of property comes from the encouraging relationship between GDP expansion and the ongoing demand for real estate. As economies grow, the demand for property drives rental prices higher.
This translates into more significant capital values. This means property tends to maintain the purchasing power of capital by passing some of the inflationary weight on to tenants and by implementing some of the inflationary weight in the shape of capital appreciation.
We hope that these 7 good reasons why to invest in commercial real estate have convinced you that property is an excellent investment. You can enjoy excellent tax benefits, an amazing rate of returns, and leverage real estate to expand your wealth.