If you’re looking to diversify your portfolio or dip your toe into investing for the first time, you may be asking yourself if commercial real estate is still a wise investment. After all, the pandemic and resulting economic downturn shook the foundations of many industries. Now that the pandemic is in the rearview mirror and the market has stabilized, we can take a closer look at why CRE is still a good investment strategy in a post-pandemic market.
Investment Diversification
As they say, don’t put all of your eggs into one basket. Keeping your investments spread among different assets can help protect you against unexpected market volatility. If all your capital is invested into one asset class – say stocks – your investment is vulnerable to a sudden downturn in that particular market sector, (such as the stock market crash of February 2020). Keep your investment portfolio diverse by placing some capital in stocks, some in bonds, and some in CRE investments. In fact, a commercial real estate investment is a solid diversification strategy because the commercial real estate market tends to remain steady during stock market fluctuations.
Positive Cash Flow
Rental income from commercial tenants can provide a consistent source of passive income, which can be a huge benefit for building your overall wealth or saving up for another investment opportunity. Plus, if you go the extra mile to hire a property manager for your CRE property, you can have the benefit of having cash coming in, without too much extra labor on your part.
Long-Term Appreciation and Protect Against Inflation
The value of CRE properties tends to increase over time, helping you build a solid foundation for long-term wealth. This appreciation can also protect your investment from devaluation due to inflation. As inflation increases, you can increase your rental rates accordingly, maximizing your investment.
Tax Benefits
There are numerous tax benefits from investing in a CRE property. You can write off many of the expenses associated with owning a commercial property including property taxes, mortgage interest, property management fees, insurance, maintenance and repairs, and other miscellaneous charges. In the long term, these tax benefits help you capture more of your hard-earned dollars year after year. If you sell your property for a profit, the additional funds will be taxed as capital gains, which have lower tax rates than traditional income.
Be Your Own Boss
There’s nothing quite like calling the shots. Owning your own CRE property puts you in control of your investment and can provide an overall sense of fulfillment. Plus, partner with NAI’s property management team, and you can leave all of the challenging aspects of being a landlord to us, while you enjoy the benefits. Make a difference in your community by providing a quality space for businesses or residents to rent. Plus, creating an opportunity for long-term wealth helps investors build a legacy that can be passed down to future generations.
At NAI, our experienced brokers can help you evaluate your investment options and negotiate the deal that works best for you. Contact us today to find out more about how we can help you with your commercial real estate needs.
