RISKS AND BENEFITS ASSOCIATED WITH COMMERCIAL REAL ESTATE INVESTMENT
Whether it’s residential or commercial real estate, any form of property can be a smart investment. Commercial real estate investment often yields a higher return on investment than residential properties such as rental flats or single-family homes, but it also carries a higher risk.
It’s crucial to know all of the advantages and disadvantages of investing in commercial real estate. So that you may make the best investment decision possible.
WHAT IS A COMMERCIAL REAL ESTATE?
The following are examples of commercial real estate properties:
- retail buildings
- office buildings
- warehouses
- industrial buildings
- apartment buildings
- “mixed-use” buildings, where the property may have a combination of uses, such as retail, office, and apartments.
THE BENEFITS OF INVESTING IN COMMERCIAL REAL ESTATE
POTENTIAL INCOME
The most compelling incentive to invest in commercial real estate rather than residential rentals is the possibility for profit. Depending on the geography, the present economy, and external variables such as a pandemic, commercial real estate investments normally have an annual return of 6 percent to 12 percent on the purchase price.
PROFESSIONAL RELATIONSHIPS
Small business owners are often proud of their establishments and wish to safeguard their livelihood. Commercial property owners are typically Limited Liability Corporations (LLCs) who run the property as a business. As a result, the landlord and renter have a more business-to-business customer connection, which aids in maintaining professional and courteous contacts.
PUBLIC EYE ON THE PROPERTY
Retail tenants have a vested interest in keeping their store and storefront in good repair because it will harm their business if they don’t. As a result, the interests of commercial real estate tenants and property owners are aligned, allowing the owner to maintain and increase the property’s quality, and hence the value of their investment.
LIMITED HOURS OF OPERATION
At night, most businesses go home. To put it another way, you work when they do. Except for emergency calls for break-ins or fire alarms late at night, you should be able to sleep soundly without fear of getting late-night contact from a renter who needs repairs or has misplaced a key. It’s also more probable that commercial real estate properties will have an alarm monitoring service so that if something happens late at night, your alarm company will alert the appropriate authorities.
THE DOWNSIDE OF INVESTING IN COMMERCIAL REAL ESTATE
While there are numerous advantages to investing in commercial real estate versus residential, there are also some disadvantages to consider.
TIME COMMITMENT
You have more to handle with a commercial retail building with five tenants, or even just a couple than you do with a residential venture. It’s impossible to maximize your return on investment as an absentee landlord. You’re probably dealing with several leases, maintenance challenges, and public safety concerns when it comes to commercial real estate. In a nutshell, you have more to deal with, and you, like your tenants, must deal with the public eye.
PROFESSIONAL HELP REQUIRED
If you plan to handle maintenance concerns at a commercial property as a do-it-yourselfer, you’ll need to be licensed. You’re probably not going to be able to handle maintenance difficulties on your own and will need to hire someone to assist you with emergencies and repairs. While this additional expense isn’t ideal, you’ll need to factor it into your budget in order to properly maintain the house.
Investing in commercial real estate is a lot more profitable with Brent Housing. Contact us on 09023330000 or 09024440000 to get professional advice from real estate agents near you.
