If you are looking for good investment opportunities, there are a lot out there. One area that is usually a good bet, if you do your research and get the right property, is commercial real estate investing. There are a number of reasons to invest in commercial real estate.
- Commercial property investing yields great returns. When you look at different kinds of investing, one of the reasons to invest in commercial real estate is that it brings in better returns than bonds, stocks or commodities. In 2015, the National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index had the return rate for these investments at 12.7%, though the typical return for a year hovers around 8.8%. That is still better than the Standard and Poor’s 500.
- Commercial real estate investing comes with a decent cash flow. One of the commercial real estate basics is that they commonly produce dividend payments on a monthly, quarterly or yearly basis. There are typically two ways these investments are set up. If someone has purchased a minority share of an office building or apartment complex, they can expect to get cash from the rents. When people make debt investments that are basically secured short term loans.
- The assets are tangible. This is another one of the main reasons to invest in commercial real estate. This is a good way to diversify a portfolio. When people own a lot of stocks in a company, the investor owns shares in something that may or may not even exist in the future. Some companies may seem to be completely safe investments but no company is perfect. There was a time when companies like Kodak, Blockbuster and Compaq looked rock solid. What do they all have in common now? They no longer exist. When you invest in commercial real estate, you own something tangible that is not going to disappear over night.
- For traditional loans for this, each month the debt is reduced. Some commercial property investments are made with traditional loans that are paid off over a period of several decades. When this is the case, the money the properties bring in can go towards paying off that loan. Each month the amount owed is reduced. When the property in question brings in rent, that rent is used to service the loan on the property.
- It can be good for your tax bill. The United States tax code looks very favorably on people who invest in commercial real estate. Any depreciation or mortgage interest can be deducted from what you declare as your income to shield it from tax liability. It is important to run all of this by a competent tax attorney or advisor to make the most of the commercial property investments.
It is worth noting that some people find they need to get a loan sooner than later when they are investing in commercial real estate. Some people find that hard money loans for real estate investors are worth the higher interest rates and shorter terms because they can get access to the loan sooner. There are enough good reasons to invest in commercial real estate that it can be worth it to make the deal go through.
When you are looking to make an investment in commercial real estate, it is important to do your due diligence. While there are a number of good reasons to invest in commercial real estate, the process is a bit different than buying residential property. It is important to get to know the “lay of the land” and to approach the process with an open mind. If you are looking for one kind of commercial property at the exclusion of all other kinds, you may end up missing out on a great deal on a different kind of building or land. It is also worth looking into larger properties than you think you want. If you are interested in owning an apartment building, it is just as easy to manage one with ten apartments as it is to manage one with five.
Investing in commercial real estate can be very exciting and lucrative. One important thing to do is get advice from experts whom you trust and to follow it.