Benefits of Investing in Commercial Real Estate

A California businessman, David Raminfard is president of KasLen Textiles and New Point Fabric. David Raminfard invests in residential and commercial real estate outside of managing these two ventures.

While investing in residential real estate can be lucrative, investing in commercial real estate offers investors many advantages. Commercial real estate (CRE) refers to property used to generate income through price appreciation, earning income, or both. Retail, industrial, and office buildings, for example, are considered commercial real estate.

The obvious benefit of investing in commercial properties is that rentals generate income. However, because many commercial leases also include an escalation clause (which requires rent increases), the amount of income made on rentals increases.

Another benefit of investing in commercial property is its performance has little connection with how the stock market performs. For this reason, some experts state this is a good way to diversify a portfolio.

The tax advantages of investing in commercial real estate are that investors can use this to decrease the property’s tax liability because the property depreciates over time. Furthermore, a person can defer capital gains taxes that happen after a sale of commercial property for an unlimited amount of time if the money is reinvested in another property.