After Tax Cash Flow Of A Sale Real Estate Why Invest in Net Lease Commercial Real Estate?

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Why Invest in Net Lease Commercial Real Estate?

Despite the risks, the advantages of investing in net lease commercial real estate usually outweigh the disadvantages. In these short articles, we will first consider some of the reasons to consider investing in commercial real estate as opposed to residential real estate, then examine the benefits of investing in net lease commercial real estate.

Diversity

Many investment advisors will tell you that investing in commercial properties is a great way to diversify your investments to protect against future changes in the economy. In the field of commercial real estate, you can take this a step further and choose several different industries to work in. It protects you from losses due to financial fluctuations in a particular industry.

Good capital gains

If held for the long term, commercial real estate offers excellent potential for capital gains. An additional advantage of this is that it protects you from losses due to inflation. Since real estate values ​​almost always increase over time, the value of your investment capital is guaranteed to keep pace with inflation.

Relatively low risk

Although commercial real estate is not the most liquid of investments, it is much safer than stocks and bonds. For one thing, real estate almost never loses all of its value. Stocks certainly can. Predicting your income from commercial real estate is also much easier than predicting what a company’s stock value will do. Carefully research property values, calculate rents and, if you’re thinking of using a double-net lease, maintenance costs and you can get a fairly accurate idea of ​​your income and the property’s future sale price.

Stable cash flow

With commercial real estate, income and expenses are also easier to predict. All you have to worry about is rent, mortgage and certain fixed expenses. What’s more, while it’s true that your income depends on the tenant, businesses are much less likely to default than individual lease holders.

Tax benefits

Many investors consider the biggest tax benefit of commercial real estate to be the tax write-off you get each year for the depreciation of your property even as the market value increases. This is in stark contrast to some investments where you pay taxes even as your investment depreciates. Just remember that although a triple net lease will reduce your risk and costs, it may also reduce your tax benefits.

Advantages of net lease agreements

The primary benefit of using a net lease agreement with your tenants is that it creates a low maintenance situation for you. With a double net lease or NN, your tenant will be taken care of

Real estate taxes and building insurance. You only need to worry about basic structural maintenance and in some cases utility bills. On the other hand, with a triple net lease, or NNN, your lessee takes care of all the costs.

Given the major advantages of investing in commercial real estate over many other risky, low-reward investments, it’s no wonder interest in the field is growing. While there are plenty of benefits to investing in net lease commercial real estate, before you get too involved, make sure you are aware of the risks as well.

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