Commercial real estate (CRE) has remained a reliable investment regardless of market conditions. Of course, any investment comes with some risk. But investors are typically looking for benefits like profitability, tax advantages, diversification, and stability. Even during market fluctuations, CRE is a valuable option that ticks most if not all of these boxes – and more. Here are some of the top reasons why you should invest in commercial real estate.
1. Positive Returns Over Time
In general, most investors realize that it’s better to hold assets long-term rather than try to chase short-term gains. Understanding this, commercial real estate provides predictable, solid returns over time. The average annual return of CRE over 20 years is about 9.5%, which is greater than the return of the S&P 500 over the same period.
2. Tangible Asset
Real estate is a hard or tangible asset. Unlike securities, which can have value one day and not much the next, real estate will always maintain tangible value from the land and building. This same asset can be used to produce other goods and services, which will be reflected in the property’s value.
Of course, property values will rise and fall. But the tangible asset isn’t going to disappear. Your investment in commercial real estate can never be worthless, which isn’t something you can say about some other investment vehicles.
3. Use as Leverage
Most commercial real estate investors carry a mortgage on their properties. This allows them to build equity on the property and leverage their investment dollars at the same time.
4. Tax Advantages
One of the biggest reasons to invest in commercial real estate is the massive tax advantages you’ll receive. Unlike with stocks and bonds, you can often reduce or completely avoid capital gains taxes with CRE. When properties are sold, investors can postpone profits using a 1031 tax-deferred exchange.
5. Inflation Hedge
Inflation is a major issue worldwide right now. One significant benefit of CRE is that it can offset the long-term impact of inflation because property rents can be adjusted to stay in step with strong economic growth and inflation.
6. Cash Flow
Commercial real estate can deliver stable and robust cash flow that outperforms other types of investments. As an investor, you can buy ownership in a hard asset like an office or apartment building that delivers rent income. Or, you can invest in real estate loans that use CRE as collateral.
Finally, every savvy investor understands that it’s vital to diversify their investment portfolio. This strategy protects against substantial losses when one class is underperforming. Putting some of your investment capital into CRE is one way to achieve diversification.
Invest in Commercial Real Estate with Caldwell Commercial
If you’re ready to invest in commercial real estate in the Charleston, SC, area, Caldwell Commercial Real Estate is proud to be your trusted partner. Our commercial realtors and property managers have 80 years of combined experience in the industry. When you work with us, you can rest assured that we will listen to your needs and goals and deliver results that surpass your expectations. Contact us today.