There is savvy in diversity. This is true in almost any setting imaginable. Diversify in your crops and your yields are greater. Use diversity in your diet and enjoy greater health. Diversify in your investments and you have a more solid strategy. In fact, almost any investment portfolio is going to benefit from diversity, and this should include incorporating commercial real estate into the mix.
While the typical strategy will find investments like bonds, stocks and savings among the most common blend of assets, many also now contain real estate of one kind or another. In fact, as savings rates have fallen to 1% or less in many instances, and stocks or bonds delivering 3% and higher, real estate can deliver an annual return of 9% or more.
Understand the Benefits of Commercial Real Estate Investments
Firstly, it helps to understand just what commercial real estate means. It can be retail property like a single building with a store or shop, but also an entire strip mall or shopping center. It can be an industrial property like a warehouse or factory, an office building of various kinds (including a corporate park), it can be a self-storage facility of any kind, a hotel or motel, and it can also be a multi-family property with apartments or multiple housing units in one building.
Within this broad array of potential assets, investors will enjoy a tremendous amount of stability and security. However, like any investment, you have to perform due diligence and evaluate any investment based on your needs. For example, how much risk can you take? What sort of returns do you need? What are the specific tax issues with one type of investment over another?
Once you understand your goals, you can then better understand how diversifying the portfolio with commercial real estate investments is such a wise choice. The primary benefits that apply to all, include:
High returns – Historically, real estate investments, especially commercial properties can supply a 9.5% return over a twenty year period
Cash flow – Unlike many real estate investments, commercial properties are noted for the dependability of their cash flow. This is a level of security that few investments of any kind provide.
Hard assets – When you own stocks or bonds, you have no hard assets. Real estate is a hard asset at its finest and has specific appeal over paper or electronic holdings.
Taxes – The benefits of properly structured real estate investments are quite substantial. There are benefits on loans and interest paid, there are tax benefits linked to the depreciation of the asset, and much more.
Hedging – It can be tough to hedge your portfolio against loss, but real property is a fantastic hedge against issues like inflation. Commercial real estate is long known for gaining during inflation, helping to maintain the value of the portfolio over the long term.
Diversity – As noted, smart investors diversify. Commercial real estate is not linked in any direct way to the stock markets, making it a great hedge. They also provide a wide range of types and options, with a wide array of prices and investment sizes available, making them suitable to almost any portfolio.
Influential – Unlike any other sort of investment, the owner of commercial real estate investments can actually influence their performance in the portfolio. This can be done by taking any steps you have available to increase the value of the property or otherwise influence its performance. You might “re-tenant” a building with higher quality clientele. You might make improvements that instantly increase the value and equity of a property. In no other way do investors ever have such control over their investment vehicles.
So, if you are looking for a good way to improve your portfolio in the North Dallas, University Park, Preston Hollow, Frisco or Plano areas, consider the many options for commercial real estate investments.