Succeeding in Commercial Real Estate
Investing in commercial real estate is a popular option among investors. It can be very lucrative if approached the right way. If you’re a budding business professional looking to enter the market, learn about the basics of real estate to avoid rookie mistakes and gain an impressive profit.
Get Tax Benefits
Perhaps one of the most appealing things about owning commercial property is the opportunity to reap tax deductions from the mortgage interest as well as any maintenance or repairs. This benefit only applies if you’re the direct owner of the property and not the owner of a real estate trust. Fortunately, crowdfunding has made it simple to get your piece of the pie.
Understand Your Crowdfunding Options
There are two common methods of crowdfunding. You can choose to get involved with the mortgage of a particular commercial real estate property. Or, you can invest in the shares of a property and receive a portion of the rental income.
If you choose the latter option you must establish a limited liability company (LLC) or limited partnership (LC). You own shares of your company or partnership that consequently holds an interest to the company or individual that owns the property. This approach creates an advantageous pass-through entity for tax purposes.
Deduct Depreciation Value
Every property suffers wear and tear. The great thing about investing in commercial real estate is that you can recover some of the expenses of keeping your property in optimal condition. Many owners lower their taxes or defer tax liability by offsetting the depreciation deduction against their generated taxable income.
Deduct Mortgage Loan Interest
A mortgage can be a hefty monthly bill so property owners should be pleased that they can deduct their loan interest by subtracting it from their annual rental income. It can lessen your tax burden and increase your overall return, which gives you an opportunity for further investments or to go on a nice vacation.
Low Capital Gain Taxation
Investors can obtain both long-term and short-term gains from their property. Long-terms gains are calculated from the sale of your real estate. Depending on your tax bracket rates might range anywhere between 0 and 20%. Your income tax rate determines short-term gains. If you’re a high-income earner, short-term gains can make a substantial impact on your property bills.
Hopefully this information gives you a thorough basic overview on how to invest in commercial real estate. Understanding all your options is the key to earning a large net profit.