Any type of property, whether commercial or residential, can be a good investment opportunity and a great way to build your real estate portfolio. From a financial perspective, commercial properties typically offer more return than residential properties but it also can come with more risks.
What is a “Commercial Property?”
– retail buildings
– office buildings
– industrial buildings
– apartment buildings
– “mixed use” buildings, where the property may have a combination of uses, such as retail, office and apartments.
Why Real Estate Investors should consider Commercial Properties:
Low Residential Inventory. Despite being the so-called “slow” season for real estate, the housing market continues to be extremely competitive and prices keep on their upward climb. With high buyer demand and a shortage of single family homes inventory, turning your attention to commercial real estate might prove to be the better move.
Opportunities to fill a larger need. Commercial property investors can see the potential in places others don’t even look. They fix up, maintain and/or improve the quality of their property, and ultimately, the value of their investment. For example here in Richmond– Nolde, a former bakery, now has 70+ condos and Victory Rug Factory has 12 condos. As inflation continues to rise, what once was can give commercial investors a chance to preserve Richmond’s history and be transformed into a modern, urban solution in this time of housing shortage.
Income Potential. Commercial properties typically have a higher annual return off the purchase price, depending on the area, current economy, and other external factors. And with unpredictable returns in stocks and bonds, having a tangible asset that is increasing in value is a great investment. The assets can then be leveraged to continue investing in bigger projects and expanding the real estate portfolio even further.
Tax advantages. Both a 1031 exchange and an Opportunity Zone investment can be used to reinvest gains from the sale of a property to defer taxation and gain tax benefits. Some deductions can include interest payments on expenses, property depreciation and expense write-offs related to maintenance and renovations.
Longer lease terms. Commercial leases commonly range longer rather than the year to year from residential tenants. This creates a positive cash flow and fewer administrative hassles. Business owners will usually lease for longer periods to recoup the costs of converting a space to meet their needs. Therefore, the turnover rate of the commercial spaces tends to be lower.
In conclusion, if you have been thinking about investing in single family homes and have been struggling to find what you’re looking for, consider investing in commercial real estate properties.
Contact me so we can formulate a plan and find the best opportunities for you to achieve the highest return on your investment!
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