3 Reasons to Try Investing in Commercial Real Estate
Posted: January 31, 2018 at 12:00 AM by Anna Jotham
When considering investment opportunities, commercial real estate offers an attractive alternative to the volatility of other asset classes. In fact, according to crowdstreet.com, the U.S. commercial and multi-family real estate market is widely regarded as a safe haven for investments, and as such, draws both domestic and international investors. That begs the question: could an investment in commercial real estate be right for you?
The rationale of investors who choose commercial real estate vary. So let’s take a closer look.
Here are three reasons you may want to try investing in commercial real estate.
- With commercial real estate investments, you’re likely to experience attractive returns.
Your earning potential with a commercial property is estimated to be somewhere between six and 12 percent. That compares to just one to four percent for the usual single-family investment property. You’ll generate spendable cash through leases, at rates that are typically much higher than other popular investment choices, such as stocks. In addition, commercial real estate offers tax benefits such as the mortgage interest deduction and depreciation deduction, which can shield a good amount of your earnings. Of course you’ll want to consult a tax advisor to understand all of the tax benefits of your commercial real estate investments.
- If you place “positive leverage” on your asset, you can place debt on the asset that exceeds the equity.
Savvy investors then use that for additional property investments, multiplying their equity.
- Commercial real estate has intrinsic value and is a tangible asset.
According to realcrowd.com, both the structure in which you invest as well as the land beneath it have value, lending the investment a unique security benefit in that it can earn income no matter how the tenant situation evolves. And because commercial real estate is a so-called hard asset, no matter what happens to the market, the property itself will remain…refreshingly unlike investing in a company that might shutter its doors in the future. As a bonus, commercial real estate has been shown historically to appreciate in value faster than other investments, through contributing factors such as proactive property management, and supply and demand. All of these are great reasons to invest, not to mention the pride of ownership commercial real estate investors experience.
Considering diversifying your portfolio? Commercial real estate may be the answer.
As you can see there are many compelling reasons to consider investing in commercial real estate: from tax benefits to earning potential to pride in owning a tangible asset. If you are considering diversifying your investment portfolio, commercial real estate may be just the opportunity you’re looking for.
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