Are you curious about investing in real estate? Wondering where to start and how to do it?
There’s more than one way to get involved in real estate investments. You can buy and flip properties, invest in real estate trusts (REITs), ETFs, and estate-related stocks, or crowdfunded opportunities. You can even own residential rental properties.
One thing many people don’t consider is owning commercial real estate. But maybe you should! Buying commercial property may be more high-risk but it is a high-reward investment opportunity.
Keep reading to learn more about investing in commercial real estate and why it might be right for you.
Table of Contents
What Is Commercial Real Estate?
Commercial real estate is a property that is used for business activities. It is a workspace, as opposed to a living space.
Commercial property could include retail and office buildings, warehouses, or industrial buildings. It may even include large apartment complexes and mixed-use buildings that encompass retail, office, and living spaces in one building or complex.
Why Invest in Commercial Real Estate?
When the JOBS Act of 2012 passed, it opened the door to millions of people to invest in commercial property. If you’re looking for ways to diversify your portfolio and increase your margins, these are just a few reasons to buy commercial property.
The higher rents on commercial property mean more income potential for you. Instead of hundreds of dollars, you could be making thousands, potentially.
Commercial real estate usually offers a higher annual return of the purchase price. Where a single-family home offers 1% to 4%, commercial properties are generally between 6% to 12%.
You are able to deduct a portion of the property value from your taxable income, reducing your total tax burden. There are also allowances, as the property capital allowances, that can help offset taxes you need to pay on commercial property. You may even be able to avoid the capital gains tax when you sell if you use the profits towards another property.
One advantage of commercial property over residential property is you often are not directly involved in the maintenance and upkeep. Many tenants are businesses who want to keep the property in good repair to keep customers coming. And many operating leases assign expenses like taxes, insurance, and utilities to the tenants rather than the owners.
Buying commercial property is a good way to diversify your investments. There are a variety of different investment opportunities with commercial properties, as opposed to residential properties.
There is more flexibility in what, where, and how you can invest in commercial property. You don’t even need to be the sole investor. You can access opportunities through crowdfunding and ETFs to reduce your risk.
Limited Hours of Operation
Unlike residential renters, businesses have regular hours. So as a commercial property owner, you can have more regular hours too. You aren’t likely to get calls from your tenants to make repairs or replace a lost key.
Advantages of Investing in Commercial Property
There are some great reasons to consider buying commercial real estate. Not the least of which is it’s a high-margin investment opportunity that doesn’t require daily hands-on management.
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