Investing in Commercial Real Estate

Nikolaos Debeyiotis

November 16, 2022


While commercial real estate is a high-risk investment, the return can be impressive. You can expand your options and achieve your financial goals if you’re open to different property types. Before deciding whether or not to invest in commercial real estate, there are a few things to keep in mind, which are listed in this article.

Tax benefits of investing in commercial real estate

Many entrepreneurs and business owners can save money on taxes by investing in commercial real estate. Whether you decide to rent out a small apartment or invest in a larger building, you can expect to receive multiple tax breaks. You should consult a financial advisor to determine which investment is right for your business.

When you buy commercial real estate, you can get accelerated depreciation, deductions for your mortgage interest, and heirloom tax breaks. However, to take advantage of these benefits, you must be aware of the tax benefits and know how to maximize them. Commercial real estate has a lot of tax benefits, but you need to know what they are to get the most out of them.

One of the major tax benefits of investing in commercial real estate is the 1031 exchange, which allows investors to defer the capital gains tax on their property when sold. However, it is important to note that the property you trade must be of like kind and of higher value than your initial purchase.

Returns on investment compared to traditional investments

Traditional investments like stocks and bonds can bring in different amounts of money depending on how the stock and bond markets are doing. However, returns on investments in commercial real estate are always stable. This is because real estate is a physical asset, unlike stocks or mutual funds. In addition, investors can visit the property in person and better understand its features. Commercial real estate might be a better choice for those who are not too comfortable with stocks and mutual funds.

Another advantage of investing in commercial real estate is its cash flow. In addition to its steady cash flow, commercial properties also tend to offer higher returns. Commercial properties can bring higher annual returns than the S& P 500. This is because there is more space, which means more tenants and more money in your pocket.

In addition to these benefits, real estate investment can offer tax advantages. For instance, you can put as little as 20% down on a property and still get a substantial return. And you can also invest in more than just one property. Diversifying your portfolio, including commercial real estate, is also a good idea.

Vacant malls are being repurposed as warehouses

Many cities and developers are repurposing vacated malls as warehouses or other uses. While some of these projects involve a new mall, others involve converting the space of an existing mall. This process has challenges, such as getting permission from local governments and neighborhood groups. Often, these projects require zoning changes that can face opposition from neighbors. However, if the right project is pursued, the government’s role can make these projects proceed more quickly.

One of the main reasons why empty malls are often turned into warehouses is that they already have places to put products on display. While e-commerce companies may have a low demand for retail space, they need extra space to store their inventory. Many businesses that used to doubt the value of e-commerce now see the benefits of selling products online. Repurposing an empty mall can help the landlord and tenants in these cases.

While this may be a good move for landlords, risks are involved. A recent coronavirus pandemic triggered a surge in mall vacancies. In an already high-crisis environment, replacing shuttered retail with an unrelated business may not be the best idea. As a result, developers are looking for different types of businesses to fill space. In addition to warehouses, some malls are being turned into medical facilities, schools, short-term storage facilities, and other businesses.

Online P2P platforms

Online P2P platforms for commercial real estate investment work like a traditional bank. The process begins with an online application. After filling out an application, the lender will review it and assign a grade to the loan. This will help investors determine if they want to fund the loan. This process can take as little as a day or two, depending on the lender and the interest of the investors.

The P2P platform connects businesses with accredited investors and real estate developers. These investors then choose loans and shortlist companies to invest in. This ensures a well-diversified portfolio with different types of investment opportunities. Investors will receive monthly interest payments on the money they invest in each project. A first lien on the property backs these funds. The platform receives revenue from the spread between interest rates.

One of the biggest advantages of P2P lending is its lower interest rates. Due to the lack of overheads and closing fees, P2P lending platforms have lower interest rates than traditional banks. This makes loans more affordable for investors and gives them a higher return than a conventional loan. Peer Street also offers loan calculators to ensure you get the best deal.