Wealth Through Real Estate Investing Strategies

Real estate can be the perfect wealth-building strategy, whether you want to start a retirement fund, create cash flow, or build equity in a traditionally robust asset class.

When carefully researched and executed, real estate can deliver consistent cash flow, tax advantages, and equity and work as a buffer against volatile market conditions. Plus, the variety of creative real estate investing options means this asset class is more accessible than ever before to a broader range of investors with different capital circumstances. 

So, what are some of the best commercial real estate investing strategies to help you unlock these benefits and build a robust portfolio? Keep reading to find out!

Unlock the Power of Leverage

Leverage is the use of borrowed money to increase the potential return of an investment or using bank debt to minimize the financial requirements of an investor to access a deal. For example, if an investor has $50,000 in cash, they can invest this money into a $50,000 asset or use it as a down payment to secure a much more expensive asset with a bank loan, say a $200,000 asset. 

This financial instrument to borrow capital means that as the property values, the returns also increase, and the investor can pay off the loan, increasing their equity in the asset year on year.

Leverage removes the most significant barrier to entry on a real estate deal, which is the high capital entry point, as loans are based on an asset's income and potential income. 

Deal syndicators can use the pooled finances from an agreement to purchase a property and use the leverage to borrow capital or a combination of the two to access large-scale commercial deals.

Increase Property Value for Higher Rent and ROI 

Value investing is finding undervalued deals on properties that can be updated and sold at a higher price. It can be an excellent strategy to boost cash flow and income if you have extra cash to invest in the property. 

Development and investment in a commercial property can justify a rental increase and contribute to the appreciation and overall value of the asset. 

Strategies to assist with this include: 

• Upgrading the property: Upgrades to internal fixtures, aesthetic features such as signage and paint, as well as external upgrades such as landscape, gardening, and ceiling touch-ups, can add value to the property. Additionally, increasing the overall space can make the asset more scalable or set it up as a potential multi-use space. 
• Amenities: Lighting, HVAC, parking access, tech upgrades such as high-speed Wi-Fi connectivity, and eco-friendly upgrades such as LED lighting fixtures and smart appliances are all some of the future-proof amenities that investors may consider adding to their commercial assets. 
• Advertising: Successful advertising and getting the property out there and on the market can boost competition and lead to a higher rental rate. Demand for your space can also reduce vacancy times when changing tenants.

Finding ways to improve your commercial asset over time also helps build long-term relationships with good business tenants who appreciate your attention to property details that can help their businesses thrive. 

Build Out Your Portfolio

Consider various CRE investment options in different markets to diversify and safeguard your commercial real estate investment opportunities.  

For example, REITs, ETFs, and mutual funds provide commercial real estate property access without management duties or active investment obligations. Crowdfunding opportunities offer similar passive investing opportunities with none of the management responsibilities.

In addition, look at syndications and hedge funds for privatized deals that offer greater returns and more substantial equity. Diversification also means geographical spread. Investors should consider high value-add regions such as the commercial real estate Chicago suburbs offer for a more balanced portfolio. 

There are so many different ways to build out your portfolio with a range of obligations and financial prerequisites. Speaking with real estate professionals is one of the best ways to determine which investment type is right for your portfolio and investment needs. 

Use Tax Advantages 

Tax advantages are often forgotten but extremely powerful wealth-building strategies. Commercial real estate investments offer investors several tax-reduction methods, and portfolio managers will often organize and maximize these benefits on behalf of investors. 

Some tax reduction strategies include: 

• Depreciation: Depreciation is a tax deduction offered due to the decrease in the value of an asset over time (wear and tear). Physical structures used for commercial activity tend to deteriorate, and the SEC considers this a loss.  
• 1031 exchange: This strategy allows investors to opt out of capital gains tax by selling and repurchasing another investment property in a specified period. It's a type of tax-deferred exchange that can go on indefinitely as long as you continue to swap properties. 
• Cost segregation: Accelerates the depreciation process by breaking down the property components and classifying them into shorter depreciation periods. 

Tax savings can go a long way to helping you build wealth, leaving you with more cash at the end of the year to save or reinvest into deals. 

Take Advantage of Expert Insights Into Commercial Real Estate Investing Strategies 

Creating wealth through real estate requires thorough preparation, in-depth research, and forming partnerships with property specialists like Brian Properties, who know particular markets inside and out. With our background in commercial real estate and the Chicago land markets, we help commercial real estate investors build ideal wealth-building portfolios. We've got everything you need to get started. 

When you're ready to talk about the best strategies for your financial success through real estate, reach out to our team! You can also get a free copy of our "Ultimate Guide to Investing in Commercial Real Estate" for more insights.