If you are a real estate investor looking to plunk down some cash in hopes of a return the best bet is on commercial real estate. Here in the Louisville area especially the market is looking great.
Obtaining up front capital for investment in commercial endeavors is far more easily done than it is for private home residential investing. You may use traditional methods of financing but also may choose to go with private equity firms, investment groups and even hedge funds. Having options opens your horizons.
Commercial properties, in general have a better ROI (Return On Income) which can contribute to your net worth. This can be leveraged against for future investments and can continue to grow continually property after property. Just to give an idea the market average for a residential property is 1-4% annually while commercial can bring in 6-12%. That is a huge difference especially if you hold several properties.
Commercial acquisitions can remain more stable than residential.
If a huge fall in the economy were to happen as a residential landlord you run the risk of tenants being unable to pay their rent and even facing eviction. Businesses tend to have more backing and be more stable long term able to ride out dips and are less likely to go belly up and be unable to make the monthly bills including the rental agreement.
Statistically in 2017 the national average of 6.1% of renters in the USA defaulted and had to be evicted costing their landlords money in lost rent, additional court fees, clean up, and advertising. While that may sound low, Louisville has the 7th highest eviction rate in the country at just over 9%. This places residential investors in the Louisville, KY area at a higher risk than many other areas of the country when it comes to residential real estate and making that decision to become an investor and take on the role of landlord.
Commercial properties usually offer longer term agreements than residential. Residential usually is limited from 6 to 12 months at greatest while office and other types of buildings can be rented to very well established businesses that are in it for the long haul and have multiple year plans laid and in place. they are looking to set down residency and be able to grow without having to uproot again any time in the near future. This can lead to multiple year lease signings and down the road even plausible options to buy if negotiated and agreed upon by both parties.
Don’t discount the tax benefits of owning commercial properties.
The tax laws are written to help encourage entrepreneurs to succeed. Mortgage interest and depreciation deductions can help to protect some of your income from the property. Talk to your tax professional for specifics on how they relate to your properties and situation.
Our experts are more than happy to help you accomplish your commercial real estate goals in the Louisville, Kentucky area. Send us an email or give us a call at 502-890-4475 if you or someone you know plans on buying, exchanging, selling, leasing, or developing a commercial real estate property.