"Your aim ought not be to simply make a quick buck, but to take advantage of a growing investment over time."
Nine reasons to invest in commercial property
The key benefit of investing your money in commercial property is its security.
When the economy declines/recedes, you will find commercial property generally holds its own. And when the economy is on the up, commercial property grows in value and provides you with a steady income.
Here is a summary of the benefits of investing in commercial real estate.
1. Strong returns
Commercial property provides you with strong and reliable returns in the form of income and capital gains. Your aim ought not be to simply make a quick buck, but to take advantage of a growing investment over time, where you can achieve a return consistently above inflation.
2. Stability of income
An important point to make about commercial property is that not only are your returns higher, they are also usually more secure. Unlike six- to 12-month leases for residential property, commercial tenants will generally lease for periods ranging from three to 10 years.
3. Lower risk
Commercial property investment tends to carry less risk than residential property or the stock market.
4. Exposure to different sectors of the economy
Retail and industrial properties probably have the most direct relationship to the economy – with retail property tied closely to consumer spending. Industrial property follows consumer spending trends about six months later.
Office buildings tend to perform more based upon supply and demand of the available office space.
5. Tax benefits
You will find that commercial property provides you with generous tax benefits – far more than with residential property.
Depreciation allowances on plant equipment within the building (air-conditioning, carpets, lighting, etc.) are the major benefit. But most commercial properties also enjoy significant building allowances as well.
6. Hedging against inflation
Property overall has traditionally been viewed as a good hedge against inflation. But long-term surveys confirm commercial property has given investors excellent returns – far outpacing inflation.
7. Investment control
As an owner of commercial property, you have a significant degree of control over your investment, such as: renovations, upgrading, changing the use of the property, restructuring the terms of the lease, choosing the type of tenant you want, redevelopment and ultimate disposal.
8. Ability to add value
Just a few ways for you to add value to a commercial property include: renovating, upgrading, subdividing and enlarging, improving the external and internal appearance, and renegotiating the lease terms for your benefit.
As you improve the property and it grows in value, you are able to borrow against your commercial investments. That way, you could quickly be in a position to control several properties – through borrowing more against your improved equity.
Chris Lang is a commercial property investor and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, his-best.biz, which he updates regularly about the best way to get the most out of your commercial property investment.