Income-producing commercial real estate offers investors the potential to derive income through the collection of tenant rents paid to property owners. Investors in commercial real estate-secured loans may derive income through interest payments made by property owners.
Potential for Appreciation
Real estate may appreciate in value over the holding period, resulting in a gain to the REIT upon sale of the real estate. Real estate has traditionally increased in value over time at a pace greater than inflation.*
Rents derived from real estate typically rise with inflation and most leases include annual increases to account for inflation, thus providing investors with a hedge that other asset classes may not.
One of the primary advantages of investing in revenue-producing real estate is that depreciation may reduce current taxable income. However, depreciation may be taxable as ordinary income when the real estate is sold in the future.
A Potentially Historic Buying Opportunity
Like most sectors of the economy, commercial real estate suffered a significant decline with the economic meltdown in 2008 and 2009. Nationally, commercial property values fell by an average of more than 40 percent from the peak set in 2007. Now may be an opportune time to acquire undervalued income producing real estate assets.
* Source: NAREIT, NCREIF and U.S. Bureau of Labor Statistics. Investing in MVP REIT, Inc. is not a direct investment in commercial real estate. Expenses and fees payable by the REIT can lower returns.
**Source: MIT Center for Real Estate; Real Capital Analytics, Moodys/REAL Commercial Property Price Index (CPPI), June 2012. Past performance is no guarantee of future results.