7 Reasons To Buy Commercial Property During Recession
The real estate market is highly cyclical and is tied closely to the rise and fall of the economy. In a recession or when economic conditions are tight, businesses lease, sell and cut back on office space, apartment complexes lose renters, malls close, hotels reduce their rates, and empty commercial buildings litter city blocks. Vacancies rise and rents decrease. However, buying commercial property during a recession can add a great deal of interest and profit to an investment portfolio. When considering buying investment property do research and find out what the vacancy rates are historically in a chosen area, talk to other tenants about the pros and cons of doing business in the vicinity, find out lease renewal rates and expectations, and determine if there is a customer base. It is also to your advantage to find out the zoning rules, and if further developments are planned for the area. As you consider purchasing retail, apartment or commercial property, you do need to review the seller’s financial statements, discuss options with the seller’s financial advisor (if permissible), and talk to former tenants. Purchasing retail property for sale during a recession can also be a smart move. Slow job growth, consumer fears and a reeling banking industry can provide you with investments purchased at a low cost, negotiated terms and possible high rental returns.
– Commercial properties are valued and assessed differently. The income is related to usable square footage and these values are much higher than personal residential properties.
– Buying commercial property during recessions will diversity your risks. If you are considering purchasing an apartment complex, you will always have an income from the tenants. In a recession, apartment owners have reduced purchasing prices and favorable terms can be negotiated. This is also true for retail properties and commercial office buildings.
– Cash flow with commercial real estate is higher than with single rental properties.
– Investment property financing is generally negotiated for long periods of time and during a recession this period of financing can be extended, renegotiated, and lowered. This will help keep your cash flow stable.
– The tax write off benefits with commercial property includes reducing taxes on income. You can write off interest on loans, repair costs and business losses. If you are purchasing commercial buildings to expand your business, this purchase can be amortized over many years and the depreciation written off on taxes.
– Find commercial property for sale to accommodate growth of a company or to round out your investment portfolio. If you have a business that needs expanding buying commercial property during a recession can give you added value for the future. If you purchase a commercial building that is currently too large for your present business, you can rent out space thus adding to your bottom line. Real estate will always fluctuate in value, but owning your own building will offset the costs of leasing and give your business more stability.
– Buying and owning commercial property can provide an income source. There are always tenants and businesses looking for commercial space to rent or lease. You will need to manage your tenants, but if you contract with the tenants for repairs, upkeep and cleaning you simply need to manage the property and make sure it is safe for tenants.