Regardless of whether a property is commercial or residential, investing in the right one can be a great financial opportunity. More often than not though, commercial properties will offer you a better financial investment as opposed to a residential property, but there are sometimes more risks with going commercial. However, even with a few risks, there are plenty of pros that go along with this type of an investment.
What is Commercial Real Estate?
- Retail Centers
- Office Centers
- Industrial Buildings
- Apartment Complexes
7 Pros of Commercial Real Estate Investments
- Greater Income Potential. When you invest in a commercial property, you’re going to rent some of it out, and that’s where the benefits lie because you’re collecting rent and there’s a big earnings potential there. The return off a purchase price with commercial real estate is usually between six and 12 percent. For residential real estate, you’re looking between one and four at best.
- Professional Networking. Interactions between the person who owns the property and the business running it are usually extremely professional with commercial real estate. The reason for this is because the landlord and the tenant have more of a business to business, customer relationship rather than something that can be more personal with residential properties.
- Limited Operating Hours. Rather than dealing with emergency maintenance calls in the middle of the night like you would with something on the residential front, businesses usually call it quits at a certain hour. Plus, with commercial properties, there are often great security systems in place with alarm monitoring, so should there be a problem, you’ll be made aware of it faster, and the authorities will most likely handle it.
- Public Appearance. Those who own a retail store are often obsessive compulsive with their image, meaning they’ll be sure to make it appealing to the public eye; otherwise generating business would be difficult. With this generation of business, the owner of the commercial property is guaranteed their income off rental.
- Objective Price Evaluation. Determining the price of a commercial property to rent out to a tenant is far easier to do then set the price on something residential. All you need to do is look at the former tenant’s income statement and base the pricing off of that.
- Flexible Lease Terms. Unlike many state laws on residential properties, commercial real estate isn’t as well mandated in terms of setting deposit limits or termination guidelines. This is because there are fewer consumer protection laws out there.
- Net Leases. With commercial real estate, there are different variations of triple net leases. This basically means that the property owner does not have to pay any expenses on the property, which is the case with a majority of residential ones. These types of triple net leases are not something you can get in residential real estate, but with commercial, there are several different types depending on the type of property you’re investing in.