CAPITAL CORP. SYDNEY

73 Ocean Street, New South Wales 2000, SYDNEY

Contact Person: Callum S Ansell
E: callum.aus@capital.com
P: (02) 8252 5319

WILD KEY CAPITAL

22 Guild Street, NW8 2UP,
LONDON

Contact Person: Matilda O Dunn
E: matilda.uk@capital.com
P: 070 8652 7276

LECHMERE CAPITAL

Genslerstraße 9, Berlin Schöneberg 10829, BERLIN

Contact Person: Thorsten S Kohl
E: thorsten.bl@capital.com
P: 030 62 91 92

Five Benefits of Warehouse Real Estate Investing

Real estate investing has long been a popular passive income strategy. One of the best ways to make money in real estate is investing in warehouses, which is a form of commercial real estate.

Commercial real estate, like warehouses, offers significantly higher returns compared to its residential counterpart. You can invest in warehouses through real estate crowdfunding if you don’t have the funding to go direct.

Top Benefits of Warehouse Real Estate Investing

1. Triple Net leases

One of the main reasons warehouses are a great investment option is the “triple net lease”. In this type of lease, the tenants pay for three more things in addition to the rent:

  • Repairs and maintenance costs for the property
  • The property’s insurance
  • The property taxes

Triple net leases are usually 5-20 years long, and the rent is set to increase after every few years. The long lease periods give the investor peace of mind as they don’t have to worry as much about frequent lease renewals or changes in rent.

Another positive is that the investor knows the exact amount of money they will receive each month. However, apart from having a fixed rent income for the lease term, triple net leases are generally more favorable to the investor than traditional residential leases.

2. High Level of Versatility

Investing in warehouse space doesn’t always mean that the warehouse must be used for storage. The space can be modified to be used for almost any business purpose. For example, manufacturers can convert warehouse spaces into production sites for their goods.

You can also convert that warehouse space into a club, restaurant, office space, or subdivide it as small retail spaces. The warehouse space is flexible, and you can convert it into what you think will be most profitable for you.

For this reason, investing in warehouse real estate can be more than just the storage aspect.

3. High Income potential

Warehouses tend to offer higher income, compared to residential real estate.

The size of the property is bigger, and there are more tenants in the property. This means that there will be more income and fewer costs for the investor. If you compare commercial properties with other investments like stock dividends, commercial property can offer higher returns.

4. Appreciation in the Value of the Property

Like other real estate options, warehouses tend to appreciate in value.

One factor that influences the value of a warehouse is proactive management. This includes introducing cost-effective improvements on the property, which improves both the usability of the property, as well as the attractiveness of the property.

External factors that affect the value of the property include variations in supply and demand for warehouse space. As the local business and real estate market grows, more people need real estate but space becomes more scarce — so the value of each property increases.

5. Tax Benefits

There are numerous tax benefits available in commercial real estate: interest deduction, depreciation deductions, non-mortgage tax deductions, and more.

Depreciation Deductions

The investor is allowed to deduct annual depreciation from their income tax.

Depreciation is the wearing out of physical properties. Commercial properties, just like every physical asset, undergo depreciation. However, the IRS currently allows property owners to calculate depreciation of commercial property for a period of 39 years. Investors can deduct from their annual income tax to cover the depreciation.

Mortgage Interest Tax Deductions

When it comes to commercial properties, an investor will also enjoy tax deductions for mortgage interest paid in a given year.

Non-mortgage Tax Deductions

Apart from the above deductions, there are also some other costs that an investor is allowed to deduct from their yearly income taxes. These may include property maintenance costs, repair costs, as well as specific property management costs.

Also, investors can deduct the cost of certain things like seminars, conventions, conferences, and others, which are related to real estate investment.

Conversely, general improvements of the property such as new furnishings or renovations, are not deducted in the year they are incurred. Instead, they are depreciated over the normal life of the specific property.

 

When it comes to investing in real estate, many people tend to be drawn more by residential properties. However, commercial properties are more profitable than residential ones in many ways.

The Mindful Capital Group has a reputation that puts us a step above the rest. What makes us so special, is that our team firmly believes in the fact that whatever is best for our clients, is best for us. With well over a combined amount of 50 years of experience, our team has a vast amount of experience in the real estate market. Having experience and being able to notice trends that may end up being profitable is key in having a successful portfolio. The Mindful Capital Group is proud to offer our investors the knowledge and experience of years of success in the real estate market.

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