There are multiple options when investing in Joplin commercial real estate. There are many ways to build wealth over the long term. Some investors like the growth potential of the stock market. Others like the relative safety of the bond market or the comfort of hard assets like gold or silver. There is no right or wrong way to build wealth. However, one of the most consistent ways is through commercial real estate investments.
The Glenn Group can show you how Joplin commercial real estate investing can build wealth. We will highlight the benefits of investing in commercial real estate, how to invest in it, and what qualifications investors need.
How Investing in Joplin Commercial Real Estate Builds Your Wealth
According to the National Council of Real Estate Fiduciaries (NCREIF), the average annual return for commercial real estate assets has been 10.3% annually over the last 25 years. For context, the S&P 500 (equity index) returned an average of 9.6% annually over the same time period.
This level of performance means that investors who chose to stick around for the long term have been rewarded handsomely for their patience. In other words, they have been able to build a significant amount of wealth. $10,000 invested in commercial real estate assets 25 years ago would be worth $115,000 today. If that same $10,000 was invested in the S&P 500, the ending balance would be $98,915.
The key point here is that investing in Joplin commercial real estate assets is a time tested way to build wealth. But, before an investor can start building wealth, they must define what their goals are.
Defining Wealth Goals in Joplin Commercial Real Estate
The first step towards building wealth through commercial real estate is to define the goal. For some investors, this could be a certain dollar amount – like $1,000,000. For others, it could be a certain amount of passive income – say $10,000 per month. Or, some investors just desire to achieve financial freedom so they can spend their time working on things that are important to them.
The goal is likely to be slightly different for each individual investor, but the important point is that they figure out what it is first, and then start working towards it.
Benefits of Investing in Joplin Commercial Real Estate
Regardless of the commercial property type, the wealth building process is the same. Space is leased to tenants and the resulting rental income is used to pay for the property’s operating expenses. Anything left over is distributed to real estate investors. These distributions produce consistent cash flow, which can be further reinvested into other assets.
There are two major tax benefits to investing in commercial real estate.
First, operating expenses are tax deductible. Depreciation allows property owners expense a portion of the property’s value each year to account for its physical deterioration of course. This is a non-cash expense so it does not reduce the cash available for distribution, but it does reduce the property’s tax liability.
Secondly, major tax benefit of commercial real estate is the way that capital gains are treated. Gains are taxable and investors may choose to pay them. Or, they could choose to defer them under a program known as a 1031 Exchange In this program then investors may defer their capital gains tax liability as long as their sales proceeds are reinvested into another property of like kind.
Specifically over a long period of time, the positive returns earned on a commercial real estate investment can be a major factor in the creation of financial security for the individuals who hold it.
One of the bedrock principles of investment risk management is diversification. It is likely not a good idea for most individual investors to allocate capital only to commercial real estate assets. Again, the best practice for commercial real estate is to hold them as part of a broadly diversified portfolio of risk assets. Consequently, the exact percentage to hold is dependent upon each investor’s own risk tolerance and return objectives.