As business adviser Maarten De Jeu explains, there are a number of good reasons to invest in commercial real estate in the current market. Traditionally, commercial real estate was seen as an investment opportunity for only the wealthy because of the high cost of entering the game. However, smaller investors are now able to participate by pooling their money to form highly effective groups.
Commercial real estate is defined as pertaining to any property or structure that is used to make money. Examples include warehouses, industrial parks, and office buildings. Residential real estate, by contrast, deals with houses, apartments, condominiums, etc. where people actually live. In general, a commercial real estate opportunity will be larger and more costly than a residential one, and that is why there has traditionally been a high barrier of entry to ordinary investors. Changes in property laws, however, are making it easier for groups of investors to have equity ownership of commercial real estate properties
Commercial real estate investments tend to be more stable over the long haul than investments in stocks and bonds. While the value of a given commercial real estate structure will fluctuate over time, it is usually much less controlled by the whims of the market than a stock or bond investment is. Because commercial real estate is generally a low-risk investment, it is an excellent hedge in any portfolio against more volatile holdings. A truism of economics is that commercial real estate tends to appreciate in value faster than inflation rises, and this makes it valuable during almost any economic period.
Moreover, renting commercial real estate brings often brings in guaranteed income for decades. This creates an ideal situation where the investment has excellent long-term value while at the same time gives the investor infusions of short term cash on a monthly basis. If the owner is having problems renting units, they can make upgrades, renovations and other changes; in short, they have more control than they do when tied to an investment in a particular stock or bond.
Leases in commercial real estate are usually for a year or more, and this means that the owner has a very non-volatile source of income. Furthermore, even when renters are making less money with their businesses than normal, they still need the structures they are renting to operate out of. Learn more: https://medium.com/@maartendejeu
Commercial real estate also has advantages when it comes to taxes. Taxes laws account for situations when the real estate depreciates in value so that the owner is not burned. Furthermore, deductions are available in different situations and a knowledgeable tax lawyer or accountant can often spot these.
About Maarten De Jeu
Maarten De Jeu is a business adviser who works out of Chicago, Illinois. With an MBA from Oxford University, he is an expert on international business. At home in Chicago, outside of his hectic schedule as a business adviser, he participates in various civic and professional groups and spends time with his family.