Real estate is one of the largest industries in the world today. From buying property as an investment to buying your own home, real estate affects everyone's life in one way or another. Although it's a beast of an industry, you don't necessarily have to work in real estate to invest in it. In fact, many people buy real estate simply to make passive income, with no intention of making it their full-time job.

Here are some reasons why commercial real estate it can be a great investment for you.

Related: Tap into the wealth potential of commercial real estate with these 5 tips

Passive income

By investing in a property, you will be able to make a passive income — a check you don't have to actively work for. Depending on the property you buy, you can rent the space to tenants and get paid each month they occupy the building. In turn, the income can be recycled to pay for the property and its expenses or be used to invest in other properties without having to touch other funds. This is great because this is monthly income that you don't have to actively work for.

Tax advantages

By investing in real estate, there are many deductions and breaks that can actually help when it comes to paying your taxes. Also, any money you make on the sale of the property will be viewed as capital gains and not an income, thus reducing the amount of taxes you will have to pay on that money.

Cash flow

As you rent out the property and the tenants pay their rent, you will create a steady cash flow for yourself and increase your income. As the mortgage is paid off, it will also help build your equity, which can help you invest in more properties and build overall wealth.

Diversification

When investing money, it is always good to invest in different types of assets to ensure that you get consistent and reliable returns. Commercial real estate can diversify a portfolio—and in the event of a market crash, properties remain intact while stocks and bonds fall sharply. It is also a tangible asset that you can touch and feel, unlike other forms of investment. Tangible assets can help minimize total investment risk and help you build a profitable portfolio.

Related: 6 Key Questions You Should Always Ask Before Investing in a Commercial Real Estate Property

The lever

In most cases, buying real estate requires an initial cash investment. This investment can earn a very high return that can fully cover the debts of the property. For example, if you pay a 20% down payment and the other 80% is debt, the property only needs to appreciate 20% for the equity invested to be 100%. However, this comes with the risk that if the property does not become profitable, it may have to go into foreclosure if the monthly payments cannot be made.

ASSESSMENT

Real estate investing offers a lot of potential growth and appreciation that you may not get in more classic investment avenues. For example, an investor may choose to buy and develop a property in an area they believe is developing. In that case, as the popularity of the neighborhood increases, the value of their property increases significantly and can lead to huge capital appreciation.

Inflation protection

As the economy grows and inflation rises and falls, commercial real estate doesn't feel the long-term impacts. Fortunately, rents can be adjusted in line with the rate of inflation and offset the impact. This results in strong rental growth and appreciation for your property, despite any deterioration in economic conditions. With other investments like stocks and bonds, inflation almost always has a negative impact.

On the other hand…

Commercial real estate, like any investment, has downsides.

For starters, it's a time commitment. Investors must invest time property management and care and its tenants. All concerns and problems of the building fall in the lap of the owner, so this aspect should be taken into consideration.

This leads to another weakness – managing and caring for the building usually requires outside help, such as property management companies. These companies are not cheap and can be costly. However, this is really the only way to properly run the building and avoid problems.

This leads to the need for money. Unlike residential real estate, commercial properties need a lot more capital for the initial investment and then cash that needs to be put into the property to maintain it. This makes commercial real estate investing unattractive as there are many costs to maintain the property and it can take time for the income to exceed the costs.

Related: 5 Proven Steps to Becoming a Real Estate Millionaire, According to an Investor

After all, every investment comes with risks. No investment is guaranteed. However, some may be a little safer than others. Commercial real estate is a great idea if you are someone looking to diversify your portfolio and find another way to increase your wealth. Although it can be scary, and the initial investments can be daunting, the returns can be very high and it's worth it!