COMMERCIAL REAL ESTATE v/s RESIDENTIAL REAL ESTATE

Real estate has been a popular source of investment for investors of all backgrounds and financial standings. It’s safe, secure, and offers the potential for great returns. Given the volatility of other markets in the current economy, the property arena is perhaps even more attractive than ever.

Commercial investments hold many advantages over residential real estate. This is in addition to non-property related opportunities. Here are the most attractive elements that should pull you towards this marketplace.

• Profit Potential

Revenue should be at the heart of all investment ventures, which is why commercial real estate is one of the greatest options on the market. As a long-term investment, commercial properties offer the potential for huge progress.

Commercial property value reflects the rental costs too. So if the asset’s rental value increases 50%, it’s worth will follow suit. This means that the inflation will often outweigh that of other properties. Better still, the return on investment becomes evident as soon as you find tenants for those units. Whether monthly, quarterly or annually, this regular stream of income aids ongoing cash flow.

• Easier Management

Residential properties do offer plenty of benefits. However, the life of a landlord isn’t always easy. Not only is there a threat of bad tenants to consider, but there’s also a need to provide the right facilities for each tenant. With commercial properties, though, the management aspects are far less stressful. This enables you to play a more passive role in the investment.

When you own several units in the same location, an onsite manager can take care of virtually all operational issues. Meanwhile, any maintenance contractors will often offer discounts due to working on a large number of properties at once. Essentially, this means that the operational costs per property are lower than the alternatives. More importantly, the investment will consume only a small percentage of your time.

This subsequently opens greater versatility in terms of the portfolio. A diverse group of offices, stores, hotels, etc. can only boost the hopes of securing a high ROI too.

• Flexibility of Funding

Commercial property also offers a chance to procure a portfolio of assets far greater than the initial outlay. This is due largely to the flexibility of funding, which is gained from the fact you needn’t buy properties with cash. In most situations, the down payment can be as little as 20%.

This means that you can potentially gain assets of up to 5x your current wealth. In turn, this offers a fantastic opportunity for leverage and continued growth. Commercial real estate needn’t always be a solo investment either. There are many opportunities to use co-ownership and joint ventures. This reduces the initial outlay and pressure while ensuring you have two brains working on the same venture.

• Tax Benefits for Maximum Returns

Investments can be a complex environment. Sadly, it’s not as black and white as simply generating profits. Commercial efforts may also be influenced by taxes and other external factors. When dealing with properties, those elements can actually be used to your gain.

The asset may grow in terms of its market value and financial worth to the investor. However, the building itself is sure to encounter depreciation over the years. This loss can be offset against the market value profits, resulting in a better outcome in reality.

• Optimum Control

Most commercial real estate investors will manage multiple properties. When circumstances dictate that money is required, moving some units on is not an issue. This can free up money, and usually in a far quicker time than residential properties, without quitting the arena altogether.

As an investor, taking these indirect factors into account is key.

• Reduced Risks

The very nature of investment opportunities means that there will always be a degree of risk involved. As a responsible investor, minimizing those possible dangers is essential. Unlike investing in company shares, property ownership ensures that you have tangible assets. History shows that even global giants are capable of suffering major blows or failing altogether. Having hard assets prevents that from happening.

On a similar note, owning several units means that the reliance on each one is reduced. If one is unused, its impact on revenue is minimal compared to the impact that an uninhabited house can cause for a landlord.