Why Should Investors Consider Commercial Real Estate?

Countless individuals have been successful over the years investing in residential real estate and often several factors typically precede such a decision, including appreciation, supply and demand, plus return on investment. Similarly, commercial real estate investing takes these variables into consideration and offers the possibility of larger profits. Many property investing experts are viewing the current market conditions as an ideal time to begin investing in commercial property and land.

Perhaps the most obvious reason individuals consider any kind of real estate investment is to make a profit. Commercial building owners have several advantages they can take advantage of to help ensure appreciation. First, commercial appreciation is only taxed when it is sold, which allows the owner to take advantage of certain tax laws. Also, since commercial property owners can fill out a 1031 Exchange and avoid paying tax when the property is sold, as long as there is continued investment in real estate, gains are shielded at sale. Thirdly, there are a number of things that an owner of commercial property can do to increase value, such as increase tenants rent or lower operating costs. Lastly, by taking advantage of a triple net lease, commercial property investors can frequently get tenants to pay for the expenses of maintaining the building.

All too often residential property owners find themselves paying for some of the mortgage due to a tenant (typically the only one) not making a payment or because of excessive maintenance costs. However, with commercial properties this rarely happens. The reason for this is because most commercial real estate loans are tied to what is known as a Debt Service Coverage Ratio. This ratio requires a property’s net operating income to be higher than the loan’s payments thereby ensuring both security for the bank and profit for the owner.

Another appealing feature of investing in commercial real estate is that it allows one to diversify in their risk (a critical piece of investing advice worth heeding). Suppose that a strip mall with space for 10 tenants is owned and all spaces are leased, if one of the businesses happens to go under, the owner of the strip mall will only lose one-tenth of their income. If that same investor owned a single family home and their tenant moves out, that investor would lose their entire source of income for that property.

Commercial real estate is a great barrier to inflation; allowing the investor to actually make money. One reason is that rent goes up with inflation and so too does the value of the property. If for example rent goes up, the value of the property correlates. Inflation also drives up the costs of constructing new properties.

Investing in commercial property provides the investor with a source of long-term income and many tax benefits. It also allows more protection in light of diversifying and allowing inflation to benefit the investor. Considered by most as a solid, secure investment type, investors should consider adding commercial real estate to their portfolios.

Best Real Estate Areas in Dubai

From a sleepy, pearl diving community to one of the most dynamic and fastest growing cities in the world, Dubai has limitless opportunities to profit from real estate investments. Part of this glowing state of affairs is the fact that Dubai has no income tax. Other reasons include that it is safe and politically stable. Dubai has excellent healthcare facilities and a good education system. The infrastructure is modern, the weather is perfect and leisure activities abound. Don’t forget: salaries are tax-free, a boon to the more than 2 million people who live there.

With all these favorable living conditions, every day more and more people are attracted to living here. In addition, there are limitless job opportunities so that real estate is a safe and growing portfolio investment. Just recently a 7-star hotel has been built, shopping malls arrive regularly filled with merchandise from the most luxurious retailers, and every day new people arrive to live and work. This calls for even more homes and apartments, so real estate continues to be a sure-fire growing investment.

Leading world corporations have invested billions of dollars in Dubai real estate. Lovely apartment complexes and villas have been eagerly sought out by those newly arrived. Real estate law is simple in Dubai: you can sell your property whenever you want and outsiders can own property in Dubai. As property owners they are given a 3 year renewable visa to live in the country. These arrangements make owning property in Dubai simple and hassle-free.

As far as where to live in Dubai, almost every area is safe, clean and filled with shops where you can buy anything you need, from groceries to clothing.

The Dubai Marina district is a sought after area in real estate, and for good reason. This is a beautiful area where one can find luxury villas and apartments, a short distance away from the best dining, shopping and entertainment spots Dubai has to offer.

The Jumeirah Beach Residence area (JBR) is definitely one to consider; it boasts walking strip filled with places to dine and shop opposite a beautiful beach and of course Bluewater island.

Downtown Dubai is one of the most sought after real estate areas in Dubai; it can be described as the heart of the city, bustling with activity and it is home to landmarks such as Burj Khalifa, the tallest building in the world, and the famous Dubai Mall, the world’s largest shopping mall where one can find 1,200 shops.

The area of Al Barsha has one drawback: overhead power lines are everywhere. Other than that, the local shopping is good and the security is excellent.

The Arabian Ranches development is away from the city, so you avoid traffic and construction. It is safe and secure and a wonderful community in which to bring up children. It is near a fine golf course and polo club. However, you’re far from town and have to commute everywhere.

At Umm Suqeim you’ll find old and new residences, ranging from a little run down to magnificent mansions. Rents are fairly reasonable, but they are not cheap. After all, the area is right near the beach and the Burj al Arab hotel. You can shop for everything from antiques to groceries and fresh fish. The location is excellent, with beach access and glorious hotels with all their facilities available to you. You’re near schools and medical facilities. However, traffic can get congested with cars heading to the beach

The areas of L’Safa and Al Wasi have large green parks surrounded by villas and family homes. These are excellent places to live for families with children However, you have to drive everywhere for everything, although not very far.

If you don’t mind paying top dollar for your residence, look to Jumeirah, the most exclusive and desirable area of Dubai. The homes are mainly low rise villas ranging from luxurious to uber magnificent. This address runs along the coast and it has gorgeous views of the ocean.

Real Estate Agents Weak in Providing Fiduciary Duties

Wow, I was astounded to learn after surveying recent homeowners how little actual service they received from their real estate agents, especially when compared to the commission they paid.

Could integration of the real estate and mortgage industries result in a more efficient and less costly transaction for the average person engaged in a real estate deal? Think about this for a moment.

Licensed real estate agents know their clients better than anyone, so why aren’t they more involved in securing the mortgage? Real estate agents have a fiduciary responsibility to their clients. Shouldn’t agents go that extra mile? Everyone knows that agents are paid good commissions when closing a residential transaction. Assisting the client secure a mortgage would help answer the question in the client’s mind, ‘whose side is he on?’

In today’s real estate market, a client becomes entangled in the endless paper processes involved in a mortgage application and may be required to complete an application on numerous occasions. If real estate agents were also mortgage loan originators, the information obtained by the agent could be used to process a home loan application. In addition to saving time and effort, people could save thousands of dollars in commissions and closing costs.

Now, I will be the first to admit that this will make the average real estate person work harder, but wouldn’t clients appreciate our sacrifice? In addition, since two sources of income would now be available agents would be in the enviable position of being able to lower their real estate fees (clients would love this) while simultaneously generating more total commissions for that particular sale.

Many individuals engaged in real estate endeavors prefer a centralized process so their time can be spent on other issues important to them. Why should they be sent from one facility to another to complete one transaction?

Let’s step up to the plate and show our clients that we are really going to bat for them.