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October 1, 2011

5 Reasons to Invest in Commercial Real Estate (Guest Post)

By Muzammil Bashir

While the residential real estate market has been in a slump for quite some time now, the commercial real estate market continues to thrive for a number of reasons. Real estate has always been, and still is a great long-term investment. Here are 5 reasons why investing in a commercial property is an excellent choice for both tax savings and growing your bottom line.

Less Competition

Residential properties attract not only investors but homeowners as well and the growing trends in real estate investment tend to focus on the best ways to buy, sell and flip residential homes. For this reason, commercial properties are often overlooked, despite the unlimited potential that any location may have.

Commercial Property Appreciates Differently

Residential properties are valued based on comparable sales in the neighbourhood. This influence doesn't directly apply when placing a market value on a commercial property. Rates for commercial property sales are determined based on how revenue is generated at that particular location, and then compared to that of similar commercial properties in the area. A small increase in revenue from your newly acquired commercial investment can bump up the value of that property significantly.

On top of this, there are other factors such as the progress of the wider economy, even as far out as the national economy of the country you are investing in. This in particular is a good reason to consider investment in other countries where economic growth is high.

High Potential for Income and Returns

A sound investment in commercial property generally provides significant benefits from long-term leases, business profit and/or capital gains. Not only can you create unlimited income potential with a great business plan, but you can also create long-term security of high returns on leases which range from 3 to 10 years in length.

Greater Choices of Investment Locations

Since leases on commercial properties tend to be longer than on residential ones, it doesn’t matter so much where you invest. This enables you to consider opportunities in Asia, Europe, The US or wherever else you would like to. You can consider properties on the merits of the infrastructure of the countries they are in. Asia of course is growing rapidly and there are several opportunities there for good capital gains as well as a good chance of leasing your property out easily and consistently.

Colourful Financing Options

Depending what plans are included in your purchase of commercial property, there are many financing options that can make it easier and less time-consuming to finish the deal. Not only are there many programs available to finance commercial real estate, but lenders typically look at a different set of data, including how well the property will potentially perform, when approving a loan. It’s not just about your finances but also whether they think the property will provide a reliable return for you.

Courtesy Muzammil Bashir of offices.org.uk – Find your office space with us.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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