Investing in commercial real estate may seem daunting for those who are used to investing in residential properties. However, investors can reap several benefits if they take the plunge into this unique form of investment. In this blog post, we will explore some reasons why you should consider plots for sale in Kisumu, one of the most lucrative cities in Kenya, as part of your portfolio.
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Of course, the primary benefit of investing in commercial real estate is the potential to gain a steady, passive income. Unlike residential properties, commercial properties provide higher yields due to their ability to produce higher rent payments.
5 Reasons to invest commercial real estate
Rental amounts are typically based on square footage, meaning larger premises can offer higher returns than smaller ones. This means that if a property owner owns several commercial properties, they can generate higher returns than residential investments.
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In addition to these benefits, here are five other reasons why investing in commercial real estate can be a smart decision.
1. More Financing Options
When it comes to financing a commercial real estate purchase, there are typically more options available than when buying residential properties. Banks and other lenders tend to be more willing to lend on commercial properties due to their higher potential returns and the ability of businesses to generate stable rental income over time.
Unlike commercial real estate, residential properties typically require a sizeable down payment, and many lenders would prefer to see a long history of consistent income before approval.
Moreover, many commercial properties are eligible for long-term, low-interest loans that can help to reduce capital requirements and make the purchase more affordable.
2. Commercial Real Estate Appreciate Fast
Commercial real estate investments tend to appreciate faster than residential properties due to their higher demand and the potential for higher returns. This is because businesses are more likely to need larger premises as they grow, leading to an increase in rent and, ultimately, a higher sale price.
In Kisumu, as is the case for many other cities across Kenya, a commercial property leased to an established business can often appreciate faster than other types of investments.
This appreciation could lead to huge returns for the investor, making commercial real estate a viable form of investment that could produce significant capital gains.
3. Lower Risk/Higher Rewards
Commercial real estate investments are considered less risky than investing in stocks and bonds due to their ability to generate rental income over time and the potential for appreciation. Furthermore, there is less risk involved when managing commercial properties since professional property managers typically manage them.
This means that investors can reap the rewards of higher returns with lower risk compared to other forms of investment.
4. Tax Advantages
Another benefit of investing in commercial real estate is the potential to take advantage of various tax incentives. For example, depreciation can be used to offset taxes on rental income, which could lead to a reduction of taxable income and, thus, potentially higher net returns.
Additionally, some commercial properties may qualify for other tax benefits, such as deductions on mortgage interest, property taxes, and maintenance costs.
5. Commercial Real Estates are Flexible
Finally, investing in commercial real estate provides investors with a great deal of flexibility regarding leasing options. Unlike residential rentals, which are typically leased on a month-to-month basis, commercial leases can be tailored to the needs of both tenant and landlord.
This makes it easier for investors to negotiate favourable terms with tenants and adjust their leasing arrangements as needed.
Looking to Invest in Commercial Real Estate?
Investing in commercial real estate can be a great way to generate consistent rental income, take advantage of tax incentives, and benefit from potential appreciation. Working with a trusted real estate company is crucial to ensure that you make the right investment decisions and take full advantage of all available opportunities.
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Username Investments Limited is the best real estate company in Kisumu, offering a full range of services, including property search and evaluation, financing advice, and more. Reach out today and learn more about Kenya’s commercial real estate investment opportunities.