Four Advantages Of Commercial Property For The Personal Investor

By Author: Rob Wilson
Total Articles: 2
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Investment real estate is any type of property that is purchased to produce wealth with the exception of the investor's personal residence. It's how you use a property that determines whether or not it is investment real estate. Commercial properties such as office buildings, retail stores, and hotels represent just one form of investment real estate. Some other examples of investment properties include: single-family homes, condominiums, and apartment buildings, manufacturing plants, and warehouses, all of which can be rented to tenants. Another form of real estate investment is vacant land held for appreciation.

The means of investing open to an investor will depend on their size. Small personal investors, wishing to invest a few thousand pounds, will probably do so via unit trusts etc, which are targeted towards property. Larger investors may choose to invest sums in the region of £25,000 upwards more directly in property investment companies through limited partnership structure, while a few investors will have the means to buy a property outright.

So what are the advantages of commercial property ...
... to the personal investor? First and foremost, consider the financial benefits. They provide income from cash flow, equity from loan pay-down, equity from appreciation, and tax savings. When considering cash flow; choose property that will produce the highest rents, have the most reliable tenants, and will return your investment the fastest. When you obtain financing to purchase investment property, you are using the principal of leverage, profiting from the use of other people's money. When a leveraged investment appreciates, equity in the property increases in two ways. In addition to the increase in equity realized as you pay down the mortgage, it also increases as your property appreciates in value. One of the tax advantages found in real estate investment is your ability to pay taxes on a lesser amount than the income you receive. If held for a long time, real estate is usually considered a low- to medium-risk investment. The longer you hold the property, the lower the risk.

Secondly, the big advantages in commercial property investments involve control. Because you are leasing commercial to space to a business tenant, the lease negotiation process is less rigid and creates the opportunity to achieve more control over the variables associated with renting property. Residential leases are more carefully defined by law and the landlord has little control over the terms of residential leases. Commercial leases are often longer in duration. Business tenants are usually more stable, carry their own insurance, have more stable incomes, and are more professional in their relationships.

In addition, because business tenants rely on customer traffic for their survival, they have greater incentive to maintain your property, which can make it easier to re-lease at a later point, and ensures you retain value in your investment.

Finally, if you own commercial property in a high-traffic area, you are virtually guaranteed full occupancy and a high-income yield on your investment both in terms of cash flow and equity appreciation. Economic and market conditions will always be a variable, but your business tenants will always be the first to recover after a downturn in the economy or a lull in the market. The higher incomes and greater degree of control that come with investing in commercial property helps you define and meet your goals for real estate investing through income, appreciation, and tax benefits, and to make important decisions like whether to manage the property yourself or hire a property manager.

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For more information about Scottish Commercial Property please visit on www.compropregister.com