Four Benefits of Investing in Commercial Property in Alabama
Commercial real estate is one of the hallmarks of a diversified portfolio, and those who are new to commercial property stand to see a multitude of benefits from their investment.
Both seasoned and novice investors will find that 2022 has proven to be a solid market for commercial property.
In April, a report from the National Association of Realtors identified significant stability in the markets for multifamily, office, industrial and retail investment properties, despite rising interest rates nationally.
It’s a good climate to invest your money in commercial property, but how does that investment work for you after you’ve signed the dotted line?
Money in Your Pocket
Consistent passive income is likely the most important benefits of investing in a commercial property.
Early hurdles such as mortgage payments and operating costs may cut into total income at the onset. Once those costs are covered, the investor can expect to receive a consistent amount of money from the property each month.
Stability in Times of Uncertainty
Commercial real estate is often a stable investment, as it is proving to be in 2022.
While any kind of investment in property comes with some risk, if you choose wisely, you can expect it to hold its value in the long term.
This makes an investment property a great method to diversify your portfolio and protect yourself from major losses over time compared to others. For example, stocks and bonds are subject to diminishing returns in times of elevated inflation, whereas property rents can be adjusted with rising inflation.
Tax Benefits
A commercial property is a great friend when tax season returns. There are a few ways an income-producing property can generate significant tax deductions.
You could write off the expenses used to maintain, operate and manage the property – this ranges from money spent on property taxes and insurance down to funds used to market the property.
By depreciating the value of a property overtime, the annual taxable income can be reduced while the property itself, hopefully, increases overtime. It’s one of many ways to reduce the capital gains of a CRE investment over the course of the ownership or investment.
Generating Leverage
You can leverage the cost of your investment while building equity.
Let’s say you purchase an investment property with a standard mortgage of 20% down, the property only has to increase in value 20% in order for a 100% return on investment.
Any use of leverage comes with an inherent risk, which is why it is important to seek advice and guidance from trusted industry professionals in order to protect yourself.
A Tangible Asset
Commercial property is a brick-and-mortar investment you can touch, unlike stocks or even cryptocurrency.
This tangible asset can also become an investment in its surrounding community, which can be an exciting opportunity in cities like Birmingham and Huntsville.
In May, the Birmingham City Council passed an Adaptive Reuse Incentive Overlay that will make redeveloping some of the city’s historic buildings a little bit easier. This creates an opportunity for investors to be a part of the city’s revitalization, restoring vacant buildings to their former glory while providing space for expanding industry and residents.
Huntsville has experienced tremendous growth in industry in recent years, making it the largest city in the state of Alabama, according to the 2020 United States Census. In addition, Huntsville was recently named the nation’s best city to live in by U.S. News and World Report.
Whether you are interested in investing in industrial real estate or purchasing land, commercial property is a great investment with many benefits.
In order to get the most benefit while curbing risks, it’s important to work with a team of industry professions you can trust.
If you’re ready to take the next step in commercial real estate investment, Ironvest is here to help.
