When it comes to real estate investing, there are lots of ways to do it. For instance, you could get into the business of buying older homes, fixing them up and then flipping them for a profit. Or, you could buy residential properties to rent out to families. You might also consider investing in stocks relating to real estate or even in investment trusts. With all the options available to you, how do you know where to put your money?
One great option to consider when looking to invest is that of commercial real estate. Commercial real estate (CRE) has some inherent risks built-in, but there’s also a much higher ceiling when it comes to profits. There are also multiple types of commercial real estate to consider when looking to go down this route for investing.
What Are The Types of Commercial Real Estate?
First of all, commercial real estate relates to properties that are meant to be used for business purposes. Under that definition, you can find commercial properties such as:
- Retail
- Office Space
- Industrial
- Multi-Family
- And more
Depending on the purpose of the property, there are different things to consider when investing in them.
Why Invest in Commercial Real Estate?
Whether you have a background in residential real estate, are a new-time investor, or are just looking to add more to your portfolio, here are some of the top reasons to consider investing in commercial real estate.
1. There Are Some Tax Benefits
Commercial investments do have some unique tax benefits that come along with them. For instance, you can count depreciation on your balance sheet and deduce a portion of the property’s value. You can also avoid capital gains taxes once you sell. For more information on what types of tax benefits are available, consult a tax professional.
2. Potential For High Earnings
As was mentioned above, commercial real estate has a higher profit ceiling than residential properties. This usually means that the initial price tag for the properties is higher, but leasing arrangements made with business tenants are usually higher than residential and tend to last longer. With more properties like this, you can increase your cash flow substantially.
3. Not as Competitive
Because it’s a little bit harder to enter the commercial real estate market as opposed to residential real estate (in terms of cost), the competition for spaces tends to be a little lower. This means you’ll have even more opportunities to invest and make a high return.