Many investors are looking to Texas when it comes to commercial real estate investment opportunities. As well they should, there’s many reasons why someone should invest in commercial real estate! Texas home to three of the hottest commercial real estate markets in the country! Combine that with stock market volatility and low yield returns on treasury bonds, commercial real estate is an appetizing venture that continues to provide an excellent risk-reward profile to investors. Let’s dive into some of the potential benefits of commercial real estate.
Substantial Current Income & Spendable Cash
Arguably the biggest benefit to commercial real estate investment is that commercial real estate assets are secured by leases which provide a regular income stream. This income stream is oftentimes significantly higher that typical stock dividend yields, and astronomically higher than current yields on treasury bonds, or even cash money market accounts.
Asset Appreciation
Historically commercial real estate investments have provided excellent appreciation value that meet, or exceed, other investment types. Properties generally rise in value due to both internal and external factors. Internal factors include proactive management, making cost-effective improvements that improve usability and property desirability. External factors can include supply and demand imbalances.
Equity Accumulation
Another important benefit of commercial real estate investing is the ability to place debt on the asset which is several times the original equity. This allows investors to buy additional assets with less money, therefore significantly magnifying your equity as the loans are paid down.
Protection from Inflation
According to a report by industry leaders, commercial real estate investments had the highest correlation to inflation when compared to other asset classes such as the S&P 500, 10 Year Treasury Notes, and Corporate Bonds. As the United States government continues to enact policies that allows the Treasury to print money at will to spur economic growth, it is important to recognize the benefits of owning commercial real estate as a hedge against inflation. As a general rule of thumb, when inflation occurs, the price of real estate, particularly real estate with mutiple tenants, will also rise. This provides added protection for investors against economic downturns due to inflation.
Intrinsic Value
Since commercial real estate is one of the few investment classes that is a hard asset, it comes with intrinsic value. The land on which the commercial property sits has value. The structure that sites on upon the land has value. As long as commercial real estate developers do their proper due diligence and choose the location and asset quality wisely, investors stand to benefit from the security of knowing that they own an asset that potential to earn incomes regardless of what happens to existing tenants.
Tax Benefits
The United States tax code benefits real estate owners in a number of ways. Mortgage interest and depreciation deductions can shield a large portion of one’s income stream. Because the United States’ economy relies on the free market, the government wants to all it can to encourage investors to invest in commercial and industrial real estate to promote economic growth and stability. In order to get the most out of any tax benefits from owning commercial real estate, it is recommend one consults a tax advisor or CPA.
Casey Development, Ltd: Commercial Real Estate Developers in Texas
Casey Development, Ltd. is the leading commercial real estate developer in Austin, San Antonio, San Marcos, and New Braunfels, Texas. We have several decades of combined experienced in identifying, securing, building, leasing, and selling commercial real estate properties throughout Central Texas. Contact our team of expert commercial real estate developers today to get learn more about how we can help you build out your commercial real estate investment portfolio.