1. Positive cash flow or income.
If done correctly, buying commercial real estate can bring in a positive cash flow. Although, it is best to discuss with a broker what all is needed to buy an investment property so you know what is coming out of your own pocket with expenses and operating costs.
2. Principal Reduction.
Most of the time real estate is purchased using a debt of mortgage loan.If you make regular and on time payments, you’re paying down principal on the loan and reducing your debt. This means that you would be increasing your equity position.
If real estate values are going up then your investment is appreciating. Appreciation and principal reduction together can improve where you stand in a real estate investment.
This is the method of allocating the cost of a tangible asset over its useful life. The amount depreciated from your investment reduces your taxable income on the real estate investment and has the potential to show a loss on paper, when in reality you had positive cash flow for the year.
There are many ways that you can benefit from buying an investment property, however it is best to consult with a broker to know your options, as well as what would suit your needs and expectations.
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