When people consider investing in the property business, many restrict their scope to single residential properties. Though, considering just residential property investment may result in missing out on a possibly huge opportunity. The equity and income potential of investing in commercial real estate is much more significant, despite the risks seeming higher than residential properties.
A few years back, we noticed stability in the real estate market of Pakistan. Anyone could witness numbers of remarkable developments in residential and commercial projects. It would not be wrong to say that the living standards and lifestyle of people are changing rapidly, and various residential projects have introduced the new style of living with quality. These projects have offered a lot to the growth and success of Pakistan property market.
The real estate investment has been a popular source for investors of backgrounds and financial standings. It is secure, safe, and offers the potential for high returns. While there is volatility of other markets in the existing economy, the property platform is perhaps even more engaging than ever. Although all possibilities in this field are good, there is no doubt that commercial real estate is the most reliable.
Commercial investments hold many benefits over residential real estate. This adds to non-property related opportunities.
If we observe globally, Dubai is considered to be the biggest market at present, which has developed in the field of property in just a year. Investors from all over the world have put in their capital there just to earn high returns out of their property. Arabs have proved themselves as traders, and because of this, Dubai is known as the capital of the world. On the contrary, Pakistan has also brought in many international investors and this improves the projects according to their needs; these include commercial as well as residential properties. When we discuss a commercial property, it is not always considered as a skyscraper or a shopping mall kind of a building that is too high and touches the clouds. Retail units, Offices, shops, and several more come under the title of a commercial property.
Pakistan has developed swiftly in the property developments, and we are proving to the world that we are not at all behind any other country in real estate and property development. Many developers have appeared locally in Pakistan and are doing some good business. All the cities of Pakistan, more importantly, Islamabad and Lahore, have delivered significant projects in recent years. When a developer is making a society or housing scheme, a well-equipped shopping complex and office blocks are never overlooked. Besides that, infrastructure has also boomed up in Islamabad.
Following are Several Potential benefits to owning Commercial Property
Excellent Appreciation Value
Whereas investments like stocks do not allow for much more than buying and selling based on the market, commercial real estate owners can invest in improvements on their properties, as long as regulations are met and necessary local government approvals are secured. A commercial real estate property owner can improve the property, restyle the exterior or interior, raise rents, or even apply for a zoning change. Inflation can also add to the value of existing properties. While new properties will cost more to develop than older properties, current locations still increase in value along with the more modern local developments.
As you build equity in your real estate business, it becomes a more critical asset that you can leverage to further develop your business without putting your practice itself at risk. This gives you more prominent flexibility in managing your business growth. It also provides you additional options when the time for retirement comes. As being the commercial property owner, you can sell the practice and underlying property outright at the time of retirement, or sell the practice only and lease the commercial property, which offers an ongoing income stream.
Cash flow opportunities
If you buy a commercial property that has space for tenants, you have opportunities for additional cash flow by rental income. You can use renter income to help pay down the property purchase, thus offsetting the cost of your investment. Though, it is necessary to remember that having tenants involves property management responsibilities that may reduce from attending to your core business attributes.
Tax Benefits for Maximum Returns
Investments can be a complex environment. Sadly, it is not as white and black as merely generating profits. Commercial efforts may also be affected by taxes and other external factors. While dealing with properties, those elements can be used for your gains.
The asset might grow in terms of its market value and financial worth to you, though the building itself is sure to encounter reduction over the years. Straight-line reduction shows that a property’s physical worth will depreciate over 27.6 years. Meantime, other features may drop in over a decade. This loss can be counterbalance against the market value profits, resulting in a better outcome in reality.
Those factors will require a professional accountant. Still, those opportunities are not available in most markets. This is yet another reason to select commercial real estate over other solutions.
Flexibility of Funding
Commercial property also offers a chance to obtain a portfolio of assets far higher than the initial outlay. This is due mainly to the flexibility of funding, which is gained from the fact you do not need to buy properties with cash. In most circumstances, the down payment can be as little as twenty percent.
This indicates that you can potentially gain assets of up to 6x your current wealth. In turn, this offers a beautiful opportunity for leverage and continued growth. When linked with the inflation gained from the fact that properties reflect rental value, the appeal is not hard to see.
Commercial real estate does not need always to be a solo investment either. There are many possibilities to use co-ownership and joint ventures. This lessens the initial outlay and pressure while assuring you have two brains working on the same venture.
Residential properties do offer plenty of advantages. Though the life of a landlord is not always easy. Not only is there a threat of bad tenants to consider, but there is also a need to provide the right facilities for each tenant. With commercial properties, though, the management aspects are quite less stressful. This allows you to play a more passive role in the investment.
When you own some units in the same location, an onsite manager can take care of virtually all operational matters. Meantime, any maintenance contractors will often offer discounts due to working on a large number of properties at once. This indicates that the operational costs per property are lower than the alternatives. More importantly, the investment will consume only a small percentage of your time. This consequently opens greater versatility in terms of the portfolio. A diverse group of hotels, offices, stores, etc. can only increase the hopes of securing a high Return over Investment (ROI) too.