Inspiretech Realty

BENEFITS OF INVESTING IN COMMERCIAL PROPERTIES RATHER THAN RESIDENCIAL PROPERTY

Commercial Property

Investments in commercial property are known for high potential yield and high return investments but there are other benefits to investing in commercial real estate as well.

 IT YIELDS STEADY INCOME

 IT HELPS BUILD FUNDAMENTAL EQUITY

 IT HELPS INCREASE LEVERAGE

 IT IS A SAFE INVESTMENT

 IT ENSURES PROMISING VALUE

 IT ENSURES PROMISING VALUE APPRECIATION

1- IT YIELDS STEADY INCOME

In contrast to stocks, bonds, and shares, commercial properties give stable income. Even when the financial markets appear to be chaotic, this income consistency keeps investors involved. As a result, it ranks among the safest real estate investments.

2- IT HELPS BUILD FUNDAMENTAL EQUITY

The amount of value that an investor accumulates over time is quick, and larger returns cause the value of real estate to increase. This considerably helps the investors because their revenue rises significantly over time, leading to bigger profits.

3- IT HELPS INCREASE LEVERAGE

It increases leverage since real estate is often bought with a down payment, and investors find it enticing to be able to purchase a property without making a complete payment. This results in larger returns while increasing leverage. Even when a highly leveraged commercial property has a loan or debt, investors can still make money from it.

4- IT IS A SAFE INVESTMENT

A promise making location ensures safe cash flow even when there are no tenants, making it a safe investment. One of the safest and most secure investment options is commercial real estate since investors find it more appealing because the revenue is consistent even in erratic market conditions.

5- IT ENSURES PROMISING VALUE -

The commercial property assures value appreciation, leading to affordable improvements and raising the desirability. It becomes a more secure and reliable kind of investment over time as the value increases and benefits investors.

Residential Property

High brokerage and legal charges are the foremost disadvantages of real estate investments. One requires considerable capital to start investing in this sector. Even after buying the property, you have to pay property tax, society maintenance, pay for repairs, etc.

 Interest rates could rise.

 The property could be untenanted for a period of time.

 You could get "bad" tenants.

 It could take up a lot of your personal time.

 House prices could remain static, or even fall.

1- Capital gain tax is applicable

On sale of property at higher price capital gain tax is applicable.

When property is sold within 3 years of purchase short term capital gain tax will be applicable as per ones income slab.

But when property is sold after 3 years of purchase, long term capital gain tax of flat 20% is applicable (after indexation).

2- High Cost

The biggest disadvantages of real estate investment is high capital requirement.

Because of high capital requirement, buying and selling of property is laborious.

This is one reason why so many people resort to loans to buy real estate property.

These almost every alternate service class people dwell under the load of home loan. Living under loan for 1/3rd of your life often becomes a curse.

And why this is happening?

Because everyone wants to buy a home for self. Hence, price of real estate property is extremely expensive.

3- High Cost of maintenance

Real estate also involves high management costs as compared to other investments.

The owner of the property not only has to maintain the internals of the property but must also pay the maintenance charges payable to the society.

This makes a real estate property more costly.

4- Other disadvantages of real estate investment

Real estate property is very illiquid. A large sum of money gets locked which is not so easy to redeem.

To keep earning rental income, it is not so easy to find suitable tenants time an again.

When market condition is not so good, market price of real estate property may also go down (temporarily).