5 Reasons Why Investing in Commercial Real Estate Is a Smart Idea
If you have ever thought it could be fun to buy the property of a local business, it might be worth looking more into. As it turns out, investing in commercial real estate can actually have numerous benefits.
When it comes to spending money, people prefer costs that are both secure and profitable. When there are other upsides like tax advantages involved, it can be another major bonus.
For these reasons, purchasing commercial property can be a smart move. Here is a closer look at the reasons why this is the case.
1. Average Annual Returns Are Solid
When you make an investment, you ideally want to invest your money in something that will give you solid gains in the future. With commercial real estate, that is typically the case. Whereas the S&P 500’s average return was 8.6% in a 20-year study that researchers conducted in 2019, commercial property investments during the same time period were 9.5%.
2. Tangible Assets Are Attractive
Another great thing about real estate is that is something that you can touch and see. Unlike other investment types, you can personally inspect a physical property. You can ask questions, look up history and form a pretty good idea of what you are buying. As such, there can be more reassurance in this sort of investing.
3. Owners Can Leverage Investment Dollars
Because most owners have mortgages on their commercial properties, this kind of investment can also be a good opportunity to build equity while leveraging your investment funds. As the value of the property increases, it can quickly return whatever you invested at the time of purchase (even if it was only 20%!).
4. Tax Advantages Can Save You Money
Without a doubt, one of the best things about owning commercial property is the tax advantages that can come with it. Unlike investing in stocks and bonds, real estate comes with multiple ways to reduce or eliminate capital gain taxes. This is especially true if you purchase properties that are in prime locations.
5. Commercial Real Estate Can Offset Inflation
Finally, another reason investing in commercial properties is a smart idea is because doing so can be a great inflation hedge. This is possible because you can adjust property rents as inflation goes up.
At the end of the day, this kind of investment might now be for everybody, but for those who have a strong interest in doing something like this, there is no doubt that the payoff can be great.