For many Americans, investing in real estate is a popular approach for building long-term wealth. In fact, according to Bankrate, 29 percent of Americans reported that real estate is their preferred long-term investment. It is important to note that the commercial real estate market achieved a total market value of over $20 trillion in 2022. So, why do so many Americans start investing in commercial real estate each year?

What is Commercial Real Estate? 

Commercial real estate is defined as property that is generally leased for business purposes. There are five types of commercial properties: office, retail, industrial, multifamily, and special purpose properties. Office properties can range from single-tenant properties to skyscrapers. Retail properties include banks, restaurants, retail shops, strip malls, and community retail centers. Industrial properties include warehouses and manufacturing centers. Multifamily properties include apartment complexes, smaller multi-family units, and high-rise condominium properties. Examples of special-purpose properties include self-storage operations, car washes, schools, and healthcare facilities. 

Why Do People Start Investing in Commercial Real Estate? 

Here are 9 reasons why people start investing in commercial real estate: 

  1. With the many types of commercial real estate available, there are many ways to invest. 
  2. Commercial real estate is one of the safest investment approaches that can be used by investors. The investment is secured by the property itself and rarely do properties lose their value over time.  
  3. Commercial properties increase in value as market values increase. They also appreciate as improvements are made to each property. Thus, real estate also serves as a protection against inflation. Commercial real estate offers long-term investment security. 
  4. Commercial real estate offers the opportunity to generate passive income and steady cash flow during its lease cycle with tenants. It also offers the opportunity to build capital when the property is eventually sold. 
  5. Commercial real estate is a proven way to diversify an investment portfolio.  
  6. Real estate investors receive important tax benefits. They include property tax deductions, deducted costs of maintenance and repairs, deductions for the costs of legal and management services for the property, deductions for depreciation, and travel costs associated with the investment. 
  7. Real estate investors can usually get easy access to loans because properties are safe for lenders. Plus, real estate loans usually come with reasonable interest rates. 
  8. Commercial real estate offers a great way to leverage investment funds. 
  9. Investment properties can be passed down through generations. 

How to Start Investing in Commercial Real Estate 

To start investing in commercial real estate it is important to understand that commercial real estate is valued differently from residential real estate. It is critical to understand and prepare for the risks of commercial real estate investing. Location is a major factor in choosing a valuable real estate property, and comparable values need to be evaluated carefully. And successful real estate investing requires using the right success metrics and including a financial reserve for cost contingencies.  

Seek Expert Financing Assistance 

Contact Capital AX Commercial Lending, based in Lubbock, TX to get the financing you need to establish and grow your real estate investing business. We offer a wide range of commercial financing options to help you achieve your goals.