Martin De Jeu, the founder of SVM Business Advisory and a frequent advisor to Fortune 100 companies, is bullish on commercial real estate, and not just for the ultr-rich either.
The Oxford-trained MBA, notes that commercial real estate, notes the fundamental differences between commercial and ordinary real estate. Traditional, home real estate is meant primarily as a place to call home, with any profit gained, a distant secondary concern. However, office buildings, industrial parks, warehouses, retail storefronts, shopping center and manufacturing centers are erected solely for profit.
Given the right market conditions, commercial real estate can be a significant source of profit for their owners, however, the expense is often a key barrier to getting into the game.
The average home for example, in the U.S., runs around $200,000, while a typical shopping center will run a minimum of #25 million dollars.
According to De Jeu, the Jumpstart Our Business Startups (JOBS) Act of 2012, signed into law by then-President Barack Obama, allowed small businesses to attract investors in commercial real estate by selling shares through crowdfunding, to attract investors.
The JOBS act freed small businesses from the take or leave it attitude of larger commercial investors, and made it possible for individual investors to buy shares in commercial real estate for as little as $5,000.
Non-accredited investors can then share proportionately in the profits upon sale of the property, or they gain a share of the monthly interest rates a borrower makes
on the loan. In both cases, there are substantial tax benefits that can be gained by
Advantages of Commerical Real Estate
According to De Jeu, commercial real estate has several advantages including:
- Minimal Investment Fees
Unlike many investment strategies requiring you to pay high fees to investment advice and counseling firms, the fees on commercial real estate are minimal.
- Protection against inflation
Many investments, bonds in particular, barely keep up with inflation. However, commercial real estate almost always appreciates well beyond the inflation rate.
In addition, many rental contracts for commercial real estate have clauses designating an annual increase in rents.
Unlike the stock exchange, which goes up or down at the whim of politics or trade agreements, commercial real estate is a solid, steady investment that will diversify your portfolio.
- Short term cash
With commercial real estate, you not only benefit in the long-haul, such as when the property is sold, but you also generate cash flow on the short-term through rental revenues.
- Tax Advantages
There are tax advantages to commercial real estate such as being able to claim depreciation of the property. Learn more: https://www.bizjournals.com/chicago/potmsearch/detail/submission/6469621/Maarten_De_Jeu
De Jeu says that now is a great time to consider diversifying your portfolio with
commercial real estate.