7 Reasons Why You Should Invest in Commercial Property
May 5, 2021
Investing in commercial property is one of the smartest ideas. Why? That’s exactly what we will cover in this post. But before we look at the reasons why it is a great idea to invest in commercial property, let us first take a look at what commercial property really means.
What is commercial property?
Any property that is designed to make money falls under commercial property.
The major categories of commercial property include office buildings, retail stores, warehouses, malls, and restaurants.
Why invest in commercial property?
These are the top 7 reasons why you should buy a commercial property if you are looking to invest in the real estate market:
- High Potential Yield
According to a study conducted by Manulife Asset Management, ‘commercial real estate has outperformed all other types of investments, like stocks and bonds, over the past 25 years.’
According to the study, commercial real estate has shown consistent growth, even when the economy was going through turbulent times. Although this does not mean that the commercial property market is not immune to changes in the economy, it simply means that it has been consistently performing well, and generating a stable return for its owners. And it will continue to be the same in years to come. Hence investing in commercial real estate can be considered a foolproof option.
- Lower Turnovers
One common problem generally associated with residential properties is they have higher turnovers, which means you have to look for tenants often. However, this is not the case with commercial property. Since commercial lease agreements are generally signed for longer terms (minimum of 3 years), you don’t have to worry about turnover.
You can expect to get a stable cash flow for years once you have rented out your commercial property. This also means that you don’t have to worry about the hassle and costs associated with finding new tenants year after year. You can just sit back, and let your commercial property bring financial returns to you for years to come.
- Property Appreciation
One of the most attractive things about commercial real estate is the amazing appreciation it goes through year after year. This can come in various forms, from increasing the rent of the property to a rise in its value in the market each year.
Unlike the risk involved in any other type of investment, like shares, bonds, and so on, this tangible form of investment involves a lot lower risk. And hence becomes a much safer and smarter option when compared to anything else. It wouldn’t be wrong to say that your commercial property investment is only going to increase in value over the years.
- Flexible Investment Options
Another great thing about investing in commercial property is that it gives you a number of options. Like mentioned in the beginning, commercial property means any estate that is used to make money, therefore, you can invest in a high-rise office building, warehouse, single storage facility, or even a full-scale mall. You can diversify your portfolio based on the amount you plan to invest.
- Tax Benefits
Commercial property investment also brings with it a number of tax benefits for the owner. For instance, you can deduct the interest you pay on a commercial mortgage from your federal income tax. You can also deduct expenses incurred against commercial property like maintenance costs, repair, and certain management expenses along with operating expenses from your income taxes.
Not only is your commercial property bringing in money, it is also helping you save it from going back to the government in the form of taxes. However, we recommend getting in touch with a taxation expert for additional details.
- Steady Cash Flow
Investing in commercial property ensures that you will continue to have a steady cash flow. In most cases, commercial properties involve renting to multiple tenants. For instance, office space or a multi-family building. In these cases, even if one tenant moves out you still won’t face a huge impact on the overall income that you are generating from your commercial estate.
Besides this, factors like longer turnovers and property appreciation also contribute to a steady cash flow.
- Topple Inflation Hedges
Another benefit that makes commercial property investment highly lucrative, according to the experts, is its ability to offset the impact of inflation long term. This is referred to as inflation-hedging benefits in industry language.
What this means is that as an owner you can adjust rent over time to adjust your earnings according to economic growth and rising inflation. You can expect to get stronger rent growth with increasing inflation and hence make more profits.
As you can see, there are a number of reasons that make investing in commercial property a great idea. If you are planning to do so, it is important to get in touch with an expert who can help you with everything related to the buying process.
For instance, you can find a Negotiator Recognized Partner (NRP) near you, and let them make everything easy for you. With their knowledge and expertise, they will ensure that you don’t have to face any trouble while finding and investing in a commercial property.
On a concluding note, it can be said that investing in commercial property is the best way to become rich. In the words of Andrew Carnegie, “ninety percent of all millionaires become so by owning real estate.”
So, what are you waiting for? Get in touch with an NRP and begin your search for a commercial property, right away!