Many people contemplate purchasing commercial real estate, but ultimately don’t take the plunge. They may be concerned about the risks, or hear hyped up media stories about all the downsides of the real estate market. However, there are five benefits of purchasing commercial real estate that everyone should know:
1.) Tax benefits. Getting into real estate investments does make tax time more challenging. However, there are many tax benefits and writeoffs you can get for being an investor. Money you’re spending on improving your property may potentially come back to you when you’re doing your taxes.
2.) Rent. Commercial real estate typically provides you with a steady stream of income from rent. While this does need to be balanced against the costs of investment, including debt and management costs, the income from rent should ideally give you a positive cash flow.
3.) Property appreciation. This is the main reason many people get into purchasing commercial real estate. Appreciation on a property can be based on both improvements to a building and external factors, such as location and the real estate market.
4.) Amortization. As you pay off your debt, you own more of the property. Your equity is being increased as you reduce the amount of your loan.
5.) Leverage. Real estate investments offer a large degree of leverage. You’re more likely to be able to purchase the property by borrowing part of its value, rather than putting your own personal money into the equation.
If you’re interested in real estate investments, but you’re worried about all the downsides, just keep in mind that investing also offers some great benefits. Although the negative aspects of property ownership are typically more likely to be reported on, the positives should also come into play when you’re thinking about purchasing commercial real estate.
