We're off to the start of a new year, and all of us have a lot of thoughts about how we want to make our lives better this year whether it is family, health, faith, or finances. I want to help you this year by giving some insight to commercial real estate investing, analyzing the advantages, looking for deals, and making things work.
The first question is why invest at all seeing that the past several years have seen many losses in the real estate market as well as the stock market. These losses make us feel like it isn't safe to put our money anywhere. However, if we put our money under our mattress, then we are losing it anyway due to inflation. So, what should we do?
Over the next several blogs, I am going to lay out what I see as advantages and strategies in investing in commercial real estate. First we need to talk about real estate versus the stock market. There is a myriad of evidence suggesting incredible growth over the long run in the stock market, but there is also evidence showing that if you missed just a small number of the best days for stock appreciation over 40yrs, then your actual returns are very low (in the 3% range). Stocks also do not generally cash flow as well as real estate. It is harder to obtain financing against and for stocks. You cannot borrow against the partial equity of a stock, and you definitely cannot get a loan against a stock without a personal guarantee, which is sometimes possible in real estate. To continue, capital gains have to be paid on any gain in the stock market but the taxes can be deferred in real estate. It is impossible to deduct business expenses from a stock dividend. The IRS allows you to depreciate real estate while it is potentially appreciating in value and still lowering your tax burden. Finally, you have control over your investment because real estate's value is derived from operations and income, and you can directly affect both of those to make your investment more valuable. These are some of the reasons that I see real estate investing as being superior to stocks for the people who take the time to invest in the knowledge and understanding of the real estate market and have the wherewithal to take action.
Finally, I have laid out some more general advantages of investing in real estate below, and we'll pick up again next week with some basic tools you'll need to begin your work on analyzing investment property.
1) As mentioned above, there are incredible tax advantages to real estate that are hard to match with any other investment
2) Real estate is an incredible asset during inflationary times because while the value of your dollar goes down with inflation, the value of your investment in real estate goes up
3) Real estate investing can afford you a semi-passive occupation meaning you can have more time for you friends, families, vacations, hobbies, etc
4) A large percentage of all the millionaires created were in real estate
5) You get the pride of ownership in something that is physical and tangible
6) You can personally help your investment grow instead of relying on the doings of others.
This blog is designed to provide competent and reliable information regarding the subject matter covered. However it is written with the understanding that the author and real estate company are not engaged in rendering legal and financial advice. If legal or other expert assistance is required, the services of a professional should be sought. The author and real estate company specifically disclaim any liability that is incurred from the use or application of the contents of this blog.