Here Are Some Reasons You Might Want to Start Investing in CRE
When it comes to real estate investment, there are lots of things you can do: you can rent out properties, join in on crowdfunded deals, flip houses, or purchase real-estate-related stocks, REITs, or ETFs. Another great real estate investment option is commercial real estate, or CRE. This is a high-risk investment- but it also comes with high rewards and opens up a world of property types you may not have even thought about.
If you are interested in learning more about CRE real estate investment, we have gathered 11 reasons you need to invest in CRE.
What is CRE?
First things first, you must understand what defines CRE. Commercial real estate property is any property that is designed to make money. This includes things like restaurants, retail stores, warehouses, and offices. Also included in this category are specialized facilities such as casinos, hotels, storage units, and healthcare facilities.
Why Invest in CRE?
Whether you are completely new to the real estate investment game or you have some experience with residential spaces, CRE is a great place to invest. Why? Below we will give you 11 reasons to add CRE to your real estate investment portfolio.
The primary reason to consider commercial real estate investment is the ROI (return on investment) potential.
Commercial real estate investment also comes with tax benefits. First of all, there’s depreciation, which allows you to deduct a portion of the property value from your taxable income each year. This can significantly reduce your total tax burden. You can also avoid capital gains taxes by taking advantage of the 1031 exchange. However, there are some caveats involved, so discuss this strategy with your tax advisor first.
Not as much competition
At this time, residential real estate investment is competitive, which is causing prices to be inflated. However, CRE is trending in the opposite direction. The dollar value for CRE in the USA dropped 57% lower in the third quarter of 2020. Therefore, it should be easier to find commercial properties.
Lots of opportunities
When it comes to commercial real estate investment, you have lots of options. You can invest in an office building or mall. You can also consider investing in a warehouse or condo community or storage facility.
If you have been involved in residential real estate investment, this may be a bit exciting for you. Most CRE doesn’t operate on a one-year lease agreement. Most of the tenants sign an agreement for three years or more. This means the turnover is lower and you can be sure of stable cash flow for your business.
Help maintain/improve your property
When it comes to improvements and maintenance/upkeep of CRE properties, it’s not typically solely your responsibility. Most of the time, lease agreements put things like utilities, taxes, insurance, and maintenance on the shoulders of the tenant.
Also, since they are running a business themselves, they are much more interested in keeping up the property than a residential tenant. They may even make improvements that increase the value over time.
Less problematic tenants
CRE tenants are a bit more professional. You don’t have to deal with tenants refusing to pay their rent or leaving the place a mess when their lease is up. After all, their reputations and dollars are on the line. They are more likely to work with their landlord and follow the rules, which means you don’t have nearly as much hassle as a landlord/property owner.
More off time
Don’t take this wrong- commercial real estate investment does require a lot of work- but the amount of time spent working on CRE is much less than the amount of time spent working with residential real estate. As a residential landlord, you pretty much have to be on call 24/7 in case something goes wrong. Most of the tenants in the commercial sector have set business hours, which means you can too. You can have more time for yourself and your family during the day.
Diversifies your portfolio
If you are already invested in residential real estate, you may want to add CRE to diversify your portfolio. After all, we’ve learned in the past few years that nothing is stable- you never know what might happen. Therefore, spreading your investments across several asset classes is a good idea.
CRE Investment is Proven
Commercial real estate investment is proven and worthwhile. All you have to do is look to billionaires such as former President Donald Trump, Warren Buffett, Donald Bren, Stephen Ross, and others. Many have made a fortune and continue to do so.
If you are considering commercial real estate investment, you’ll want to make sure you are working with a professional. Contact Toluca Lake Capital to learn more about your options.