Reasons To Invest In Commercial Real Estate

Reasons To Invest In Commercial Real Estate

Whether you have a long career in residential property investment or you’ve never invested in real estate at all, commercial real estate can be a smart place to put your money. But why commercial real estate? Here are the top reasons you might want to consider it for your real estate portfolio.

Additional diversification

One of the top benefits of investing in real estate is its diversification potential. Real estate has a low and negative correlation with other major asset classes. This means the addition of real estate to a portfolio of diversified assets can lower portfolio volatility and provide a higher return per unit of risk.

Income potential

The yield on commercial real estate is usually higher than that on residential properties, both on a per square foot and an initial investment basis. This is especially true if you decide to lease or rent a multi-unit commercial property.

Regular income stream

Commercial properties offer a regular stream of income through the use of leases. Most commercial property leases at a higher rate than residential property, keeps the tenants for a longer period of time and has fewer vacancies. This means your income stream will likely produce higher than stock yields.

Tax benefits

There are also tax benefits that come with commercial real estate investments. First, you have depreciation, which can allow you to deduct a portion of your property’s value from your taxable income each year. For many investors, this reduces the total tax burden quite significantly.

Appreciation

Real estate investors make money through rental income, any profits generated by property-dependent business activity, and appreciation. Real estate values tend to increase over time, and with a good investment, you can turn a profit when it’s time to sell. Rents also tend to rise over time, which can lead to higher cash flow.

 

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