There are various ways to invest in real estate. A commercial investment property, however, helps you obtain maximum returns. It is much better to put in your funds in a commercial property than a residential one.

Let us now understand how commercial real estate makes for a profitable investment.

Regular Income

One of the most important reasons to invest in a cheap commercial investment property is that they are income generating. This kind of real estate pays out regular cash distributions, which makes the investor confident and secure. In the case of commercial real estate, investors achieve income from the property’s cash flow, despite its sale. It is not uncommon for commercial real estate to pay out more than 10 percent per annum.

Leverage

Commercial properties are known to be an exceptional investment kind over time. You can buy the property with may be 20-30 percent cash down, and the rest has to be paid with a mortgage. The ability to buy assets with value more than the immediate cash available allows you to become wealthy in no time. Let us take an example to understand the concept of leverage in a better way. You buy a commercial property for $1,000,000, with $200,000 down payment, and $800,000 mortgage. As the rents go up to 50 percent, you sell the property for $1,500,000. The net profit on the sale, therefore, comes out to be $500,000.

Capital Gain

It is quite common for commercial properties to increase significantly in terms of value over time. When rents increase with inflation, the value of the property rises too. Rent doubled implies doubling of the property value. Moreover, inflation increases the cost to build new properties. The values of prevalent real estate match up with those new values.