The industrial sector within the real estate industry has many alluring benefits, making it a perfect location for financial investments. Furthermore, it is a commercial property that is used for industrial use is considered to be industrial property (warehousing manufacturing, storage, warehouse, logistics, showrooms, etc. ).
Even though all investments carry a level of risk, industrial real estate investments tend to be more steady than other investments. While analyzing this conclusion, a few things should be kept in mind, and here they are.
Consistent and Predictable Cash Flow
In most industrial real estate ventures leasing with a single tenant is an accepted norm, except for Flex industrial properties, which are typically multi-tenant. Leases can run for 20 years and more, and there are several ways to extend the lease. Additionally, annual rent increases are often included in the contract. Investors’ cash flow is more stable and predictable when leases with a long term have yearly rent rises. You may find industrial properties in Saint John if you are looking for one.
Double-net or triple-net (NNN) leases are the most common industrial leases. This implies that the owner has no involvement in the operation or management of the building. Other than structural components like a roof structure, the tenant generally is accountable for the entire cost of the building’s occupancy under a NN lease. Some of these include home insurance, property taxes, and even insurance. During the term of a NNN lease, the renter is responsible for paying all of the building’s running expenditures, including all the costs associated with repairing and maintaining the structure. Maintenance of the property is solely on the shoulders of the tenant.
Returns on Investment/Distributable Cash Flow
The investment in a commercial real estate company in Atlantic Canada yields higher net returns and more distributable cash flow because of the combination of predictable, increasing, and steady cash flows, together with the tenant’s obligation to cover the majority (but certainly not all) expenses associated with operating and maintaining the property. A preferred annual return in the 8-10 percent range is not common, and yearly returns of 15% or greater aren’t common either.
One of the numerous benefits of investing in real estate for industrial purposes is its possibility for future expansion and diversity. The investment in the new industrial commercial listings in Fredericton could lower your risk exposure due to its distinct characteristics. You can build a solid fund of assets by investing in many stable industrial properties across various areas and industries of the country.
If we were to discuss the advantages of industrial real estate investment, we would have to consider the potential tax benefits. Real estate is a tax-advantaged investment for everyone. The industrial real estate market is not any different. Asset depreciation applies to any industrial real estate owned by a commercial entity. For commercial and industrial properties, depreciable assets can provide significant tax benefits. Depreciation can be a non-cash expense; therefore, it is important to track it. There’s a paper loss while paying taxes, but this doesn’t affect the company’s cash flow. Paper loss can sometimes decrease tax-deductible gains from selling other assets.
Capital gains can be made when an investment is stored for a lengthy period. When an asset is sold, profit is taxed at the long-term capital gain rates rather than the higher short-term capital gains rates or earnings. The new long-term 0% capital gain tax rate set in the Tax Cuts and Jobs Act in 2017 is especially advantageous to investors with smaller assets.
Due to its steady cash flow, higher yields, lower maintenance requirements, Long-term tenants, and one-of-a-kind tax benefits, industrial real estate is an asset every investor must consider seriously when evaluating their portfolio.