Investors who have experience with residential real estate and are looking for ways to expand their portfolios often look to commercial, industrial, and retail space to grow their investments. Shopping malls have been a popular option for investors with significant upfront capital and who are looking for a long-term investment that, if done correctly, can generate generous positive cashflow.
Here are five reasons why shopping malls have been a popular option for investors looking to step into the rapidly growing retail investment space:
If you’ve been in the real estate investment world for a while, you know the key to success is diversification. Once you have a few residential investments under your belt (buy-to-let, flipping properties, turnkey investments, etc) retail space and commercial property can be the next right step. When you diversify, you minimize your risk of loss, preserve capital, and increase your chances of generating significant returns.
Think about it this way: if you were to purchase a single corner store or retail space and it went under, it could be a devastating loss for your investment. If you invest in a mall, however, if one store fails it does not dramatically impact your investment. It is much easier to navigate the loss of one store among many than a single store. Investing is all about reducing risk, and shopping malls offer less risk than other types of investments.
Shopping malls can be considered REIT investments, which means they come with some pretty significant tax advantages. For example, REITs aren’t taxed on the corporate level no matter how much profit they generate. Understanding taxation in regards to this type of investment can be tricky, but it’s important to consider that generally, REITs are exempt from taxation at the trust level, as long as 90% of their income is distributed to their unitholders.
Tenants who take up space in a shopping mall typically sign long term or multi-year leases. If you’ve experienced the drama and frustration that comes with a tenant that breaks their lease, you know how these extended and unexpected vacancies cost you time and money. Tenants who invest in space in a shopping mall are committed to making their business work and are less likely to break their lease and leave you stranded. This means fewer vacancies and a more consistent stream of income.
A Simple Investment
When you invest in shopping malls, there isn’t a lot of guesswork. The shopping mall business model has been around for a while, and it works. You’re not putting your money into a new idea or novel concept. Shopping malls are a simple investment because as the investor, you don’t have to do much to ensure it works. If the mall is making money and has a history of making money, you can consider it a relatively simple and safe investment.
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