Top 7 Reasons To Invest In Commercial Real Estate
By Payman Emamian
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Although the residential real estate market has been under fire lately, the commercial real estate industry has to date, remained relatively unscathed. In fact, that’s an understatement; the commercial real estate industry is continuing to thrive, making it a great time to invest in commercial properties as part of your long term financial plan. Here are 7 reasons why now is a great time to invest in commercial properties, even if you’re leery of the residential market.
- Prices Have Improved.
After the peak of the real estate market roughly 18 months ago, when residential and commercial markets were commanding unprecedented sales prices, the surge has now leveled off. Today, prices on commercial properties have declined a bit, making them much more affordable than in the previous few years.
- Great Financing Is Still Available.
Unlike the residential mortgage lending market, the commercial lending market continues to hold up well. Guidelines for commercial loans have always been tighter than residential guidelines, and as such the commercial market has not experienced the level of defaulting borrowers. Since the commercial lending market has remained stable, investors are happily still backing commercial loans, meaning that there are excellent loan programs available for qualified buyers.
- Promises Cash Flow In Addition To Equity Earned.
Commercial properties are unique in that while you are earning equity in the property, you’re also supplementing your cash flow. Similar to a primary residence, when you invest in a commercial property you build equity month after month. But commercial properties provide an added bonus through earning you additional income each month (so long as you’re leasing the spaces for an appropriate amount.)
- Income Earned Can Be Offset By Depreciation.
Speaking of the aforementioned cash flow that can be earned through leasing your commercial property, there is even more good news. Much of the income that you “earn” from leasing your space can be offset in taxation by the depreciation of the building over time. Working with a trusted CPA will help you maximize your tax benefits.
- Offers Shelter for Wealth.
Investing in commercial real estate allows you to “shelter” some of your wealth, by having your money spread out amongst various investments. Real estate is one of the few investments which have historically always yielded long term profits. Moreover, by putting a significant amount of your earnings into a commercial property investment, you are able to “shelter” that money from rigorous taxation. Again, you’ll need to consult your CPA on the best ways to accomplish this legally.
- Offers Great Addition to Retirement Planning.
A well thought out retirement plan generally includes a diverse portfolio. While there is certainly something to be said for investing in stocks, bonds, etc., investing in commercial real estate can be an incredible supplement to traditional retirement accounts such as 401Ks.
- Demand Has Potential to Outweigh Supply.
As our population continues to grow so too will the demand for commercial and mixed use properties. After all, more people lead to more business opportunities, which in turn correlate into demand for office space to house the businesses. Remember that real estate is a limited commodity, and as such, demand for land and properties will continue to increase as years go by.
Payman Emamian is the President of Premier Realty, a boutique agency based in Los Angeles. Payman is a commercial real estate broker and tenured investor, with more than 20 years of experience in the real estate and mortgage industries. Visit http://www.mypremierrealty.com
Article Submitted On: November 12, 2007