3 reasons to invest in commercial property

By Greg Bell

Commercial real estate is everywhere – from office buildings and warehouses, to retail spaces and leisure facilities. 

Many people, however, are nervous to invest in commercial property. This kind of real estate investment takes a certain amount of capital and a level of expertise, but trust us – it's worth it. 

Here are three reasons to add a commercial property to your portfolio

1. Increased cash flow

Unlike stocks or other investments, real estate typically offers a steady cash flow through rental income. That means you're earning not only through value add and equity, but also each time tenants pay their rent. 

While residential properties also provide a rental income, commercial properties tend to earn a higher annual return. Further, commercial investors typically have fewer expenses that need to come out of that rent. Residential investors will need to pay water rates, council rates, repairs, maintenance and insurance, while these are typically covered by the tenant in commercial schemes. 

2. Leverage

Investors add wealth by using assets as leverage. With leverage, you use borrowed capital from your current assets to purchase another investment. 

Commercial real estate investing allows you to place debt on an asset that's several times the original equity. This means you are able to buy more assets with less money and – at the same time – increase your equity as you pay off the loans. Commercial real estate investors often put down as little money as possible or even none at all.

This, of course, isn't without risk. If the value of one property declines significantly, you still must pay interest and principle on the full value of the loan. 

3. Tax incentives

When you own a commercial property used to run a business, you can claim tax deductions for expenses associated with owning it. Expenses include interest on a loan or property and maintenance costs.

You may also be eligible to claim a credit for the GST in the purchase price of the property, as well as GST on other expenses related to buying the premises, such as the soliciters' fee and ongoing, operational costs. 

To get the most out of any commercial property, you need to have the right people behind you. At Ray White Commercial Gold Coast, our property managers have the experience and insights to help you run your investment like a business. To find out more about adding commercial real estate to your portfolio, reach out to our team today

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