If you’re looking for a solid investment that resists inflation, real estate might be right for you.
Of course, there is residential real estate, but you may not be interested in the hassle of dealing with tenants and maintenance on a regular basis. What about investment in commercial real estate?
With commercial real estate, you can avoid most of that and pick up quite a few financial benefits along the way. Let us discuss these a little further.
Why commercial real estate?
Commercial real estate is different from residential in that your clients are usually business entities who run their operations out of your property.
One of the most important things investing in commercial real estate will give you the distance from the day-to-day effort of managing your investment.
You can hire a property management company to do that for you. Or, you can invest in companies like this one at https://www.reicapitalgrowth.com/reicg-insight/is-commercial-real-estate-in-trouble-why-now-is-the-best-time-to-invest/, which will manage your investment for you. This may be an option you may be more comfortable with if you’ve never done this before.
You might be reluctant to invest given what’s going on in the world right now. With remote working, social distancing, and lockdowns to prevent COVID 19, you may be wondering if the real investment isn’t a bit risky right now.
All investment carries risk, but there is good reason to believe that as economies around the world rebound, commercial properties will soon enjoy a resurgence.
Benefits
Tax breaks
Commercial property owners qualify for a number of tax concessions. This is important because more of your business/investment earnings return to you.
Safeguards against inflation
Real estate is one of the few investments that tend to appreciate over time. It is less volatile than stock and other financial instruments. Therefore, it is one of the best stores of wealth there is.
You can expect that a commercial property over 20 years old will net annual returns of 9.5 percent. That’s good performance for any investment.
Reliable path to building equity and wealth
Annually, commercial real estate has returns of 6 to 12 percent on the purchase cost. Compare this to residential real estate, with returns of 1 to 4 percent for the same period.
Greater returns mean more money in your pocket. It also means you can pay the mortgage on your property back faster and build owner’s equity.
Helps diversify your portfolio of investments
The old adage about putting all your eggs in one basket applies here. Any good investment professional will advise that you diversify and commercial real estate is one of the best ways you can do this.
It’s a solid, low to medium risk investment on which you can expect medium to high returns regularly. It is a tangible asset that you can see, feel and touch. This offsets nicely with other financial instruments usually found in portfolios that offer lower returns or higher risk, or don’t protect as well against inflation.
When considering investments, therefore, commercial real estate is one you should consider. Whether you choose to invest directly, or through a proxy,
