Is it Profitable to Buy Commercial Property?

The choice of whether is it profitable to buy commercial property, becomes much more challenging for someone like me who is new to real estate investment.  As I am planning to invest in commercial property, I did a thorough research about the same.

Is it Worth Investing in Commercial Property?

I had a common belief that large investors and businesspeople are the only ones who should invest in commercial real estate. On discussing the same with a real estate expert, I learned that it is not always the case, as salaried individuals can also invest in commercial real estate, particularly in stores and showrooms. 

He highlighted a few advantages and disadvantages of investing in commercial property.

• High rental income:

Compared to residential property, commercial property has a larger rental yield. Commercial real estate offers significantly higher rental yields than residential real estate. The yield from commercial property is often in the double digits. The biggest benefit of purchasing commercial real estate is this. 

• Easy to deal with tenants:

When it comes to commercial real estate, corporations, banks, and retail chains typically rent the space. Dealing with these organisations is not too difficult, and there is no need to chase after them for the rent.

• Regular income flow:

Compared to residential property, the income from commercial property is typically more constant and regular. This is yet another important benefit.

• Demands higher investment:

When it comes to commercial property, there is a requirement for the involvement of a bigger amount than with residential property. 

• Costly loans:

Compared to residential property, loans for commercial property are more expensive. With regard to commercial property, it is reasonable to assume that interest rates will be 100–200 basis points higher.

• Less tax incentives:

For an investment in commercial real estate, there are significantly fewer tax breaks available. When it comes to the interest paid on the loan used to purchase the commercial property, there is no tax benefit or rebate. Conversely, EMIs paid for residential real estate have considerable tax benefits. 

These pros and cons, clarified my understanding about is it profitable to buy commercial property or not. I am planning to go with my decision of investing in a showroom. As I believe this will provide me with a regular source of income.

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