Commercial real estate is a popular form of investment. It can lead to an enormous fortune, but there are several pros and cons. An intelligent investor should research everything. Here are some that you need to consider.
What is commercial real estate? There are various types. There is retail, industrial, office, residential, and “mixed-use.” Thus, they can vary from anything from shopping malls to warehouses to office towers. In contrast, residential property is housing with four or fewer units.
Commercial properties can have excellent income potential. Once a lease is signed, you’ll have rent coming in every month. This can often be increased through leverage. You can use this income to expand your portfolio or pay for living expenses.
More Professional Relationships
Dealing with residential tenants can be difficult. In contrast, commercial clients are more professional. You’ll often be dealing with business owners who want to keep their business site looking sharp. They have a vested interest in keeping things clean. Instead of dealing with an individual, you’ll be dealing with a business.
The business tenants will keep an eye on the property and help the owner maintain and prove it.
Limited hours of operation
With residential, you have to be available 24/7. If there’s a toilet that needs to be plunged at 2 AM, you have to do it.
In contrast, commercial properties often have limited hours.
More Flexibility in Terms
Many states are tenant-friendly when it comes to residential properties. Payment disputes can get expensive and take months to resolve. With commercial properties, there are fewer laws protecting tenants. You’ll have more say in how things are run.
Depending on the size of your portfolio, it can be a big-time commitment. You’ll need to search for tenants when you have a vacancy and respond to maintenance calls. However, it’ll be less than residential.
Larger initial investment
Commercial properties usually require significantly more investment than residential. Some of the more significant commercial properties run into millions of dollars. Maintaining them can get expensive as well.
Compared to the stock market, you’ll have to deal with more risk. Someone might slip on your property or hit a patron with a car in the parking lot. Criminals could vandalize the property.
Commercial property can be very lucrative. There are many advantages and disadvantages. Consider everything before investing.