Investing in commercial property
Investing in the real estate market today is a high risk business depending on the performance of the economy. Many are drawn to residential properties but if one invests property that is set to perform no matter the state of the economy, it is advised that one should look into investing into commercial property. There are several benefits of venturing into this side of the real estate market. Listed below are reasons why one should consider this;
One of the main attractions of investing in commercial property is the benefit of security. Residential property will depreciate should the economy slow down but commercial ones generally still despite the changing economic climate. If the economy is strong, the value of the property grows and will continue to provide a steady income.
Commercial property provides reliable returns in terms of income and capital growth. The idea is not to immediately expect some quick gain but an investment that is meant to give one solid returns over time.
Stability of monthly income
The returns on commercial properties are usually higher and are more secure. Whereas residential property usually attract short term leases, commercial property leases will give room for leases not less than three years and can even go for up to ten years.
Low risk factors
Investing in commercial property tends to carry lower risks than residential investments in the stock market.
Exposure to different economic sectors
Retail and industrial properties have a direct relationship to the economy as they are dependent on consumer spending trends and are indicators of growth. Commercial properties on the other hand perform based on long term supply and demands.
Commercial properties attract tax benefits and building allowances. Depreciation allowances on equipment like air conditioning systems and lighting are quite significant.
Hedging against inflation in the economy
Many investors have always seen that buying commercial property is a good hedge against inflation and this is based on past records where the results are seen over time.
Control of investment
As a direct investor, you have control over your investment in areas such as property upgrade, change of user should ne want to change its to a residential property or mixed development property, tenant selection, redevelopment and eventual disposal of the property.
There are several ways one can add value to a commercial property. And these include; renovating, extending (floors and plinth area) which increases the property value.
Through quick witted borrowing against the commercial property investments, one has the advantage of creating a sizable portfolio of properties over time.