Expert Reveals Why Commercial Property Costs Beat Residential
Appreciation and Value Increase
Commercial properties also have a higher potential for appreciation. The value of these properties is primarily driven by the revenue they generate, unlike residential properties, which are often influenced by comparable sales in the area. This means that improvements or increased rental rates can significantly boost the value of a commercial property. For instance, a minor increase in rental income can lead to a substantial increase in property value, given the capitalization rate's impact on commercial real estate valuation2.
Tax Benefits and Incentives
Investing in commercial real estate also comes with several tax advantages. Property owners can benefit from deductions such as mortgage interest, depreciation, and operating expenses. Additionally, certain commercial properties may qualify for government incentives, such as tax credits for energy-efficient upgrades, which can further enhance the overall return on investment3.