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Buying A Commercial Property 101: Why Investing in Commercial Property Is a Smart Move

Are you thinking about investing or buying a commercial property for your business? Whether you are a first-time purchaser trying to find the ideal location to cement your business or an established investor looking to enter the commercial property market, buying a commercial property can be a profitable option. From commercial office buildings to retail outlet spaces – the possibilities are never-ending!

In this detailed article, we will explore the advantages of buying a commercial property as an investment as well as provide you with a guideline containing advice on how to go about buying a commercial property so that you can navigate and undertake the process like a pro!

Buying a Commercial Property
Buying A Commercial Property: A beautifully improved commercial property situated on one of the busiest roads in Florida!

Why Buy a Commercial Property?

Stability and Long-Term Growth

The nature of contractual conditions around commercial property leases differs from that of residential property leases. This is because commercial property agreements are generally much longer than residential agreements. In essence, this means that the income generated from leasing a commercial property – has a longer duration and therefore a more consistent and secure cash flow and source of income. This, along with the fact that commercial property will increase in value with time, makes buying a commercial property to lease it to businesses, a viable and attractive prospect for investors.

Diversification of Investment Portfolio

Although stocks and bonds may be the popular choice for most investors, clever investors take into account the possibility of potential losses and divide their investments amongst various assets. This helps equalize the volatility and unpredictability of the markets and also is a means of protection against possible losses – a strategy known as diversification. Buying commercial property can be a great way to therefore not only reduce risk but also achieve balance.

By diversifying your investments, you minimize your risk. Therefore by including commercial property in your investment portfolio, you will be both diversifying your investment portfolio as well as minimizing your overall risk. This is supported by an article in Forbes (2020) where Mark Tiefel highlighted that including commercial real estate is important when he emphasized the importance of the diversification of investment portfolios.

Tax Benefits

Different tax advantages are applicable when owning commercial property. Some of these tax benefits include possible tax credits for specific improvements made on the commercial property, interest deductions for mortgages as well as deductions for depreciation. It is important to consult with your Tax Advisor to ensure that you maximize your tax benefits related to the ownership of commercial property.

The advantages of buying commercial real estate as an investment not only encompass a stable, continuous income stream and protection from market fluctuations in the short term but also lead to increased commercial property values due to market valuation being elevated due to the certainty of a fixed income according to U.S. News (2021)

Tax code is another benefit presented to owners of commercial property. The wear and tear of the commercial property over time is compensated through depreciation which enables income tax deductions on an annual basis. As per the IRS, nonresidential properties are permitted to allow for depreciation for a period over 39 years – an advantage that would ensure a long-term benefit as a result thereof. By decreasing tax liability, commercial property investors retain more earnings.

Lastly, commercial property investors can also make use of the 1031 tax exchange, which is a strategy in tax that delays capital gains tax. Normally, capital gains tax is incurred when selling an investment property. However with the 1031 tax exchange –  the capital gains tax can be postponed if you are reinvesting in another property. This therefore enables the investor’s capital to be preserved when reinvesting, ultimately nurturing growth within your commercial property portfolio.

Tips for Buying a Commercial Property

Define Your Investment Strategy: Before venturing into your journey in commercial property investment, you need to identify what your goals are in terms of investment, what type of commercial property you are looking for as well as what your threshold to risk is. For instance, are you looking for an industrial, corporate office, or retail commercial property? When your investment strategy is clearly defined, it will assist you in the choices and search options when buying a commercial property.

Conduct Thorough Market Research: You want to ensure that your commercial property investment has high growth potential. To do this, you need to ensure that you do market research. Examples of this include researching factors like rental prices, market trends in the local area, the rates of vacancy as well as other economic indicators. By taking into consideration what the demand is for renting commercial property as well as demographic data – you can make sure that the location you have chosen to buy commercial property in corresponds with the objectives of your investment.

Work with a Knowledgeable Real Estate Agent: You would require the expertise of a real estate agency that knows the local market and is reputable in the industry. Your research will only take you so far. Therefore to cover all your bases, work with Greene Realty in DeLand, Florida which has lived up to a tradition of trust over decades in the real estate market since 1978. They will assist you in facilitating the smooth process of buying a commercial property, guide you with their knowledge of the local market as well as assist you in the negotiating process to ensure you get the best possible deal.

Perform Due Diligence: Cover all your bases by doing a full assessment of the chosen property’s risks, the condition thereof as well as the feasibility of the property financially. By looking at the condition of the property, the existing or prospective agreements of the leasing thereof as well as previous financial statements – you can rest assured that your decision to purchase an investment commercial property is a good one!

Secure Financing: Your financial goals need to correspond with the terms and rates that you will procure from lenders. Therefore it is not only important to explore and consider the availability of various financing options such as SBA loans, commercial property crowdfunding groups, and traditional loans, but also to ensure that you ensure that you work with your lenders to secure the best rates and terms to make the buying of a commercial property feasible from an investment perspective.

Close the Deal: Once the agreement to purchase is finalized all other areas of concern are satisfied, close the deal! Make sure that you include your real estate agency when going over the closing documents, along with an attorney to ascertain that the transaction and process are successful and smooth respectively.

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Partner with Greene Realty for Your Commercial Real Estate Needs

Buying A Commercial Property

At Greene Realty, we understand the complexities of buying a commercial property and are committed to helping our clients achieve their investment goals. As the best real estate brokerage in West Volusia County, Florida, we offer unparalleled expertise, personalized service, and a vast portfolio of commercial properties to choose from. Contact us today to speak with one of our knowledgeable agents and take the first step toward owning your dream commercial property.