Whether you are a new or experienced commercial real estate investor, the following checklist are some key motivations to qualify reasons for your investment decision:
Positive Cash Flow- Sound investments should generate positive cash flow over multiple years. The income can be used for funding different needs, diversifying investment portfolio or retirement.
Tax Advantages- The cost recovery deductions ( depreciation) normally defers ( and saves) taxes.
Appreciation- In addition to positive cash flows, good property will appreciate in value over time. Continual improvements of the real estate along with a stable tenant base also increases value.
Positive Leverage- When an investor obtains financing with a lower interest rate than the unleveraged yield of the property, this will increase the yield to equity (IRR) as the loan amount increases. This powerful positive leverage causes an even higher increase in the leveraged after-tax yield.
Inflation Hedge- Real estate typically has been an excellent hedge against inflation. With fear of inflation mounting, real estate will remain an attractive investment vehicle in spite of lower caps and higher interest rates.
Psychological Benefits - Real Estate is a physical asset ( bricks and mortar) providing psychological security vs nonphysical assets such as securities.