- High loan-to-value mortgages – most investments require that you pay cash but rental properties can be purchased with 20% down payment.
- Fixed interest rates – most commercial loans are based on a floating rate such as prime interest plus one or two percent compared to real estate loans as fixed rates for the term.
- Long terms – commercial loans are generally short-term such as six months or a year with the possibility of being renewed for another six months or a year unlike real estate where a 30-year mortgage is commonplace.
- Appreciating assets – real estate has a long-term history of going up in value.
- Defined tax advantages – many investments are taxed as ordinary income but rental real estate enjoys a non-cash deduction called cost recovery, the profits from sale are taxed at lower long-term capital gains rates or may be eligible for a tax-deferred exchange.
- Control – rental homes don’t require partners and afford the investor more options than investing in mutual funds and other traditional investments.
