Real estate investing is a great way to increase your wealth and save for retirement. While many investors go the residential route and put their money into homes and apartment buildings, there is another option: commercial real estate.
Investing in commercial real estate affords benefits many people don’t realize. The initial investment is more costly – yes – but as you’ll see below, it’s worth it in the long run. Let’s take a look at the many benefits of commercial real estate investing.
1- A Steady Stream of Income
The businesses that occupy commercial properties usually have a monthly or yearly lease that they pay to the property owner. The monthly “rent” is typically higher than that of residential property, and because a commercial entity tends to be more stable than an individual, vacancies are less common. As such, a commercial property investment yields a more reliable, steady stream of income than residential investing.
2- There’s Less Competition on Good Deals
Residential real estate investing is becoming a very popular pastime. There’s much of competition, so if you’re not quick enough, someone else will snap up the good deals. With commercial property investing, however, there are fewer investors, making it more likely that you’ll close better deals without hassle.
3- Faster Appreciation
In general, commercial real estate has always appreciated in value faster than most other types of investments. This is especially true if you can get a good deal on a property and make upgrades and improvements on it in a cost-effective manner. Doing so increases its value and makes it possible to charge more for the lease. Ultimately, should you decide to sell it, you’ll garner a nice profit on your initial investment.
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4- More Leverage to Grow
If you’re in the market to grow your investing business, commercial properties give you a way to do so without running your bank account dry. When you own commercial property, you can place future debt that’s much higher than your initial investment against the property, allowing you to buy more properties to increase your wealth.
5- Less Risk Than the Stock Market
Even if your tenant is unsuccessful in their business venture, your commercial property still has value and the potential to generate an income. This is untrue of the stock market where losses are common when the market tanks.
6- Tax Breaks
While most forms of investment don’t come with any tax benefits, the opposite is true of real estate investments. Buying and owning real estate affords a couple of substantial tax breaks that can help lower your tax debt significantly.
- Mortgage interest deduction, and
- Depreciation deduction
Always make sure you have a tax professional who knows real estate investing do your taxes to be sure you’re taking advantage of all the breaks you have coming, as well as to make sure you aren’t making any mistakes that could cost you dearly.
7- Tenants are More Respectful
Because commercial real estate tenants use these properties for their livelihood, they are typically more respectful and professional, which leads to a better landlord/tenant relationship than with many residential investments.
Also, commercial tenants tend to take care of the property better and when they leave, leave it in better shape than residential tenants often do.
There’s no doubt investing in real estate is a great way to make money. However, many people don’t realize that commercial offers many benefits over residential investing. From bringing in more money consistently to dealing with better tenants, you may want to consider commercial real estate as your next investing venture.