BUSINESS AND COMMERCIAL INVESTMENTS
INVESTMENTS ADVANTAGES IN COMMERCIAL REAL ESTATE PROPERTIES
The basic reasons for investing in commercial real estate properties are capital preservation (safety), appreciation, positive cash flow, equity buildup, returns, leverage, and tax benefits.
.Good rate of return: Historically commercial real estate has produced a high rate of return for the investor compared with other types of investments. Appreciation ahead of inflation and protection against recession.
.Leverage :Real estate investments are typically highly leveraged. An investor can barrow 70% of the appraised value to finance a commercial real estate investment. The goal of leveraging is to increase one’s yield (return) on investor’s own capital by using borrowed funds. (Use the other people’s money to make more money). Leveraging is the art of using a small portion of one’s own money plus a lot of barrowed money to obtain appreciation and income along with tax benefits from the property.
.Equity buildup: As a property appreciates in value and the mortgage debt is reduced the investor’s equity grows. The money from the tenant is paying your investment.
.Tax Shelter: Some of the advantages of owning real property investments are the allowable deductions from gross income. An investment is a tax shelter when it shields income or gain from payment of income taxes.
.Depreciation or cost recovery: Is a key deduction because it reduces taxable income without involving cash outlay. Financial expenses; mortgage interest is deductible, Operating expenses; cash outlays necessary for running and maintaining the property they are deductible. Like property taxes, hazard insurance, supplies, management, maintenance.
The multifamily market is the bright spot in the commercial real estate industry. Growth in household formation, no married households, and migration to south Florida has increased demand for multifamily product. Coupled with limited urban infill development opportunities, these factors should position the multifamily market for strong occupancy and raising rental rates in the next years.
“The long-term and compelling demographic trends that exist within South Florida will continue to drive strong residential and commercial real estate demand.”
COMMERCIAL REAL ESTATE = SAFE HEAVEN