Even in difficult economic times, commercial real estate, in particular, has the potential to provide the capital growth and consistent returns that most investors seek. Here are some reasons you should consider adding commercial real estate to your portfolio, regardless of whether you’re considering investing in an apartment building, office space, light industrial space, or a self-storage facility.
Consistent Cash Flow And Income
Investing in commercial real estate may provide consistent income more significant than the typical bonds and dividend equities yields. Stable income has the potential to offer protection and diversification from the financial market’s volatility, and historically, commercial real estate has not moved in lockstep with equities and bonds.
Reap The Tax Benefits
A real estate investor may profit from various tax advantages with commercial real estate investments. Taxes on cash distributions may be sheltered or postponed by deductions for things like interest and depreciation. For instance, current cash flow will frequently be lower than the total interest and depreciation costs, yielding a return akin to a tax-free bond. These advantages will, however, typically be recouped following a home sale.
Protection From Inflation
Investment in commercial real estate can be a fantastic inflation hedge for investors concerned about how inflation will impact their portfolios. Inflation is likely to be tolerated by investors in commercial real estate, given the asset class’s historical performance, according to a TIAA-CREF analysis. Historically, returns on commercial real estate have done well to beat inflation over five-year holding periods. Commercial real estate returns have shown a slight correlation with inflation over short periods, suggesting their capacity for inflation hedging.
Additional Leverage
One advantage of direct commercial real estate investing is the potential for increasing the purchasing power of each dollar of equity by putting debt on the asset. This raises the property’s overall potential rewards, which raises the risk. A property worth $1,000,000 is an easy illustration. Usually, just $250,000 in equity will be needed, with the remaining amount financed by a loan. The cash return would be 100 percent if the property sold for $1,250,000 annually. The cash return would only be twenty-five percent if the property were purchased without debt.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook, Twitter, and Pinterest.