Commercial property investment puts some people off because they think they need a nose for business. Yet, it is an investment and doesn’t need to be a business. You can also pay others to manage your assets. So, from value to diversification, here are some things you need to know.
The Long-Term Potential Offsets Risk
The best investments are the long-term assets. These require less work and build value over time. Commercial investors like Randy Benderson understand this, which is why they purchase retail-heavy land. Unlike residential, commercial real estate in the US has an annual ROI of around 9.5%, with a 10.3% return for properties held for more than 25 years. This makes getting in on the action early a worthwhile venture, as you can make enormous profits long-term.
Commercial is More Valuable than Residential
As mentioned, commercial developments are more valuable than residential. From retail to office space, there are many opportunities for investment. Residential investments are limited by regulations, the housing market, and economic factors. However, commercial rentals are governed by the same rules, and you can make large profits when the markets are up or down. With a diverse portfolio, there are opportunities to become a commercial property mogul!
Commercial Property Investment is Risky
Of course, no investment is without risk. In fact, it is believed that around 70% of investors lose money. Commercial properties come with some unique risks that you need to be aware of:
- The market can fluctuate wildly and often surprises experts by just how much.
- Commercial property requires a lot of management and time investment.
- There is often a large financial barrier to entry with commercial property investment.
- Renovations can be costly and are usually required as the rental changes.
DIY investing is among the riskiest. If you want to get your foot on the commercial ladder, always seek guidance from a professional commercial strategist and portfolio manager.
Commerce Offers Excellent Diversification
A diverse portfolio is the hallmark of a wise investor. Not all properties will stay profitable, and unprofitable units may become popular. The markets are always changing and can be unpredictable. A diverse portfolio allows you to offset losses when there are fluctuations. Commercial real estate is valuable alone. Yet it can help form a formidable strategy when combined with other investment opportunities such as residential, stocks, and even crypto.
There Are Certain Tax Benefits
As with any venture, there are tax benefits related to commercial properties. No one likes paying taxes, and it is estimated that only around 60% of Americans pay income tax. The good news is that there are many advantages when it comes to tax and commercial real estate. First, you can claim tax deductions based on the depreciation of the property’s value. You can also claim deductions based on the mortgage rate, and capital gains tax is lower than income tax.
Summary
There is excellent long-term potential in commercial property investment. However, there are some risks, such as fluctuating markets and costs of renovations. Another advantage, though, is that you can claim numerous tax deductions related to commercial properties you own.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)