Commercial real estate is becoming one of the fastest growing opportunities for potential investors, and now is a great time to get involved if it's something you've been considering.
From the country's current economy and unemployment rate to mortgage opportunities and foreclosure rates, a number of factors are contributing to create a strong market for commercial real estate investors. Those who seize this opportunity can take advantage of the potentially lucrative income stream, tax benefits, and protection against inflation from this type of venture .
Below are a few of the main reasons why you should start investing in commercial real estate today.
1. Strong Economic Indicators
The current state of the economy is ideal for commercial real estate opportunities. Since the GDP decrease in 2009, the country's GDP is bouncing back and has been steadily on the rise. In fact, GDP is expected to increase by over 2 percent this year and continue to do so at this healthy growth rate.
In addition, the unemployment rate is expected to drop to 4.4 percent by the fourth quarter of 2017. Since 2010, the unemployment rate has been decreasing steadily, meaning more people have money and will be able to buy and sell real estate, creating a robust market. Right now the U.S. https://www.atulhost.com/http-response-code-google-sheeteconomy is growing faster than it has in over two years, unfortunately there is no guarentee this will continue which is why you should act now.
2. Easier to Get a Mortgage
During the recession from 2008 to 2010, obtaining a mortgage was quite difficult for many Americans. In 2017, lenders have rolled back their credit requirements. You can obtain a mortgage with better terms than those offered in recent years, and more people are taking out loans as a result.
Mortgage rates and terms are currently favorable for borrowers. Locking in a great rate and terms today to finance your commercial real estate investment could create a financially rewarding scenario long term.
3. Tax Benefits
If you decide to invest in commercial real estate, you can enjoy substantial tax benefits. Commercial real estate is a business, and a full-time commercial real estate owner can legally write off depreciation, maintenance repairs, home office expenses, and other expenses associated with managing property. An employee with some commercial real estate property can write off up to $25,000 annually against their other income.
These tax savings will help keep more money in your pocket to either spend or use for additional investments. Of course, it’s always a good idea to consult with a qualified tax professional when investing or starting a commercial real estate business.
4. Appreciation and Leverage
A property you purchase or invest in now will likely be worth substantially more in the future. This is particularly true if you’re investing in prime commercial real estate properties. This is referred to as “appreciation.” If you decide to hold on to a property for a long-term investment, most, if not all, of the appreciation could end up being tax-free. A rental property that’s increasing in market value can also mean increasing rental income over the long term.
Most commercial real estate investors use other people’s capital to finance their purchase instead of their own. This is called “leverage,” and a typical example is when you borrow money from the bank to buy a property. If you are taking out a real estate loan for your commercial real estate investment, generally, you only need to shell out 20 percent of the total amount as down payment.
If the real estate investment goes up in value, you will be making a profit on the dollars you invested, thereby increasing your net worth, and enjoying the benefit of a more valuable property.
5. Steady Flow of Income
By purchasing commercial real estate or investing in a commercial property, not only can you become your own boss, but you are also setting the stage for earning a steady flow of passive income from renting the property to businesses. As long as your tenants remain on your property and diligently pay the rent, you will be getting a check from the property every month with minimal work. Depending on your financial situation, you can also hire someone to manage the property for you, meaning you have even less work to do as you receive a steady cash flow each month from your tenants.
Compared to a 40-hour work week, generating income in commercial real estate does not involve much work. Of course, that's not to say it’s a walk in the park, and you need to be a smart and informed business owner, making shrewd financial decisions. Think of it like this: If you are working a regular job and you’re injured, sick, or laid off, you will not continue to generate income. However, your commercial real estate property is not going anywhere, and the income from that property will continue to flow.
6. More Foreclosed Homes
The current state of the market is very unique as it relates to real estate. The most recent recession has resulted in many commercial real estate foreclosures. Some of these foreclosures are still available on the market and can mean a great deal for you.
Foreclosures are priced below their actual market value. As long as you do your homework and avoid the common pitfalls when buying foreclosures, these properties can mean a good amount of income while you own and manage it, or they will be worth a substantial profit if you choose to sell. There are agents that specialize in commercial real estate foreclosures, allowing interested investors access to current market knowledge without needing to learn it all themselves. If you have the time and patience, you can find great foreclosure deals!
Guide to buying a foreclosed home.
7. Inflation Protection
Putting your money into commercial real estate can help protect the value of your assets. Rent for commercial real estate properties generally keeps pace with the rate of inflation, so you will not be losing money to inflation as you would if you keep your funds in cash. Also, real estate is not as volatile in value as stocks or bonds tend to be.
8. Financial Security and Freedom
If you have the means to do so, investing in commercial real estate can significantly bolster your income and financial situation. Having a steady monthly income from your investment properties is an excellent way to make money on the side or save some extra cash for retirement. Or if you go all in and work in the industry full time, it’s a rewarding way to make a living.
Regardless of whether you’re investing on the side or managing properties full time, the financial security the investments can provide is hard to beat. Your real estate is likely to appreciate over the years, so if you ever need a large sum of cash, selling the property is a great option. And again if you hold onto the property, you will enjoy the passive income it brings each month.
9. Inheritance
Not only does commercial real estate benefit you financially as an investor, but it’s a proven way to create assets and income for future generations of your family. Unlike stock investments, real estate does not require considerable time and attention over long periods of time with a buy-and-hold strategy. Real estate can be held in a trust to generate a stable source of income for your heirs. Even better, real estate held in a trust can also be protected from any legal mistakes that your heirs might make.
Investing in commercial real estate will not make you rich overnight, but adding it your portfolio is a great way to diversify your investments. The potential to make a lot money in commercial real estate is huge, so if you make the right moves, you and your family can reap the rewards for years to come.