If you’ve been looking for ways to expand your real estate portfolio, commercial real estate may be the next step for you. Commercial real estate properties include anything from shopping centers and office buildings to warehouses and industrial parks.
In addition to the fact that commercial property for sale at Launceston can provide stable cash flow, below are seven reasons why investing in commercial property is a smart move.
- More space equals more income
Instead of buying multiple single-family homes, for example, if you invest in a commercial property, you’ll have greater income potential and more room to grow.
And with greater income potential comes greater tax benefits. The more commercial space you own, the more deductions you can claim, which means the lower your tax rate will be.
- Fewer vacancies mean more profit
Commercial properties are typically easier to lease or rent than residential spaces because commercial tenants generally commit to longer leases and larger spaces. This is because they want to grow their businesses and avoid disruptions that could come with moving frequently. As a result, fewer vacancies mean less downtime between tenants and more profit for you in the long run.
- Lower risk
While the general economy, stock market and housing market fluctuate, the commercial real estate market has a reputation for being more stable. Commercial properties tend to be more recession-proof and are less likely to be affected by dips in the economy.
- Longer leases
Unlike residential properties, commercial properties have longer leases. Whereas residential tenants often sign one-year leases, commercial tenants may sign leases for five years or more. These longer lease terms can provide you with a steady stream of income for several years.
- Tax benefits
On top of the steady cash flow stream, commercial property owners enjoy tax benefits that do not apply to residential property owners. Since mortgage interest and property taxes are deductible on your income tax return, investing in commercial property can provide you with additional tax breaks.
- Higher returns
Commercial property can command higher rents than residential properties because the tenants are typically business owners and the property is an operating expense for their business.
Investors can also gain more capital growth from commercial properties because they tend to be more concentrated in areas with greater demand.Commercial rent typically earns you nearly twice as much as a residential lease does per square foot, and some commercial leases guarantee your income even when the property is vacant. Another benefit of owning commercial property is that you are able to charge your tenants for maintenance expenses, which can significantly reduce your costs.
Appreciation of commercial properties tends to be higher than appreciation of residential properties because of their location and capabilities. Commercial properties are usually located near major highways and other businesses that ensure there’s a steady stream of customers nearby. In addition, the layout of the buildings and parking lots makes it easier to provide services or sell products than it would be if it were a home or apartment building.
- Less competition
There’s less competition from other investors in the commercial property market compared to residential property, so it’s easier for a new investor to break into the market and get started on building a portfolio of commercial properties.
