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Why You Should Consider Investing in Denver Commercial Real Estate


February 21, 2018

One of the most popular and common investments to make is in real estate of any kind. You’ve probably heard it so many times that it almost goes in one ear and out the other, but it bears repeating that commercial real estate is one of the smartest investments a person can make. Investing in Denver commercial real estate, even with the recent rise in property values, is still a safe bet to make. There are a number of key reasons why you should consider investing in some kind of commercial real estate in the Denver area.

Tangible Assets

When it comes to investments, there is no more solid and concrete investment than real estate. Whether it’s the land or the structures that are built upon the land, commercial real estate is something you can touch and feel.

Unlike a lot of investments a person can make in the stock market or other asset classes, real estate is a tangible option for those who like to know their investment is in something real. Past examples of companies going belly up due to fraud or poor business management illustrate the point that stocks are much less tangible than real estate.

Cash Flow

Making the decision to invest in commercial real estate is one that is smart in terms of it being a solid asset, but is also one that can provide a steady flow of passive income over time. Renting your property out to tenants will allow you to receive a consistent income stream, and with the boom in Denver’s economy, you can be confident that you will have tenants to fill your property.

Commercial Real Estate makes sense on make fronts, both in terms of the short term gains as well as the long term benefits. There is a limited supply of prime land that exists in any given area, and with the growth of the Denver metro area in recent years, we can expect prices to continue to rise over time as more people move to the city.

Impressive Returns

There’s a reason that real estate remains an incredibly popular choice for both institutional and private investors, and that’s the impressive yields you can achieve by investing in commercial real estate. When comparing real estate’s value as an asset class, one can compare it to things such as stocks, currencies, bonds, and even precious metals to see its real value.

The National Council of Real Estate Investment Fiduciaries (NCREIF) measures the performance of a pool of individual commercial real estate properties in order to provide a measurement of real estate’s asset value. The NCREIF index for the year of 2015 reported an annual return of 12.7%. When compared with the S&P 500 and the Dow’s performance over the same time period, commercial real estate outperformed both as an asset. Over the course of a 15 year period, the NCREIF index reportee an average annual return of 8.8%, which is 200 basis points higher than the average of the S&P for the same time frame.

Depreciation

Depreciation can be a useful tool in any investor’s arsenal, specifically when it comes to investing in commercial real estate. As a property depreciates over time, improvements will need to be made in order to upkeep and maintain a particular property’s value. Investors can plan for this cost by budgeting and understanding how to use depreciation to their advantage.

At some point in the life of a physical asset, improvements will need to be made in order to keep it in good clean order, and to ensure it does not depreciate further as an asset. While this is an unfortunate reality of owning real estate, it can actually be utilized as a way to offset taxes from another source of income. If another property does not require maintenance, you can utilize the cost of having to fix your other property by writing it off as a tax expense. Done correctly, reducing one’s tax liability can pay off in your favor.

Asset Appreciation

Historically, commercial real estate has also been a very reliable asset in terms of its ability to appreciate in value. The supply of land and property is finite, meaning that over time the price will likely rise, assuming favorable local economic conditions exist. In Denver, this is clearly the case, as the economy is one of the healthiest in the entire nation.

You can expect commercial real estate properties in Denver to continue to rise from local conditions as well as internal factors. These include things such as making improvements to the property and ensuring that the property is well-maintained. Improvements made to both the building and the surrounding landscape can be greatly beneficial to the health of a commercial real estate investment.

A Great Hedge Against Inflation

Commercial real estate investments have the highest performance in relation to inflation when compared with other major assets, such as stocks, bonds, and treasuries. When inflation happens, you can expect the price of real estate, especially that of multi-tenant properties to rise.

As governments in the United States, Europe, and Asia continue to implement monetary policies that lead to increased inflation, commercial real estate investment is becoming an attractive hedge against these factors. As inflation rises, so does the cost of labor associated with maintaining your commercial real estate investment property.

Come see the experts at COHI Capital Private Equity Lending. We are happy to help you assess your needs and create a beneficial plan immediately. We will help you decide what type of loan will work best for you, as we have fulfilled successful funding needs for over a decade. If you would like a full detailed review of your situation, this can be completed in addition to any other resolution or monetary needs that you require. Request additional information by contacting COHI today. Call 970-922-3277 or contact us for a decision. Often these are made the same day and can be addressed depending on client needs and schedule.