There is potential financial gain from investing in commercial property. Yet, you should be prepared to take certain risks and consider the long-term when making decisions. If any of these relate to you—and if you find the property that will benefit your company or your financial situation the most—then you may be able to take your portfolio to the next level and enhance your cash flow.
What makes a commercial property a desirable investment?
When we speak of commercial property, we typically refer to various types of structures, including but not limited to office buildings, retail spaces, industrial buildings, apartment complexes, and warehouses. However, there are definite benefits to successfully managing these investments, despite the complexity involved. Here are a few reasons why investing in commercial property might be profitable.
- Income potential. This is the primary advantage of purchasing commercial property as opposed to, for example, renting residential property as an investment. Commercial properties can have an annual return of up to 12% on the purchase price. However, this number varies depending on the location and many economic circumstances. In contrast, single-family home properties typically have an annual return on the purchase price of no more than 4% at most. However, it is important to keep up with real estate industry trends.
- Relationships on a professional level. Even if, for no other reason, the owner of a commercial property is more likely to operate the property as a small business, the fact that they own the property increases the likelihood that they will do so. Because of this, the landlord-tenant relationship becomes more analogous to the business-to-business customer relationship, making it easier to maintain professional engagement while ensuring that it is advantageous for both parties.
- There are restricted business hours. Most businesses close their doors for the evening, so you will only often have to work if they do. Being called out in the event of a fire alarm or a break-in are two exceptions to this rule. Even so, if you own a commercial property, you almost certainly have access to an alarm monitoring service that will contact the authorities on your behalf in case of a break-in.
- More objective price evaluations. In most cases, determining commercial property pricing is much simpler than doing so for residential properties. The rationale for this is that you often get an income statement from the owner and then use that to inform your pricing decision. This is typically something that a seasoned broker will perform for a fee. On the other hand, residential properties have the propensity to follow pricing patterns that are more emotionally driven.
Does it make sense to put your money into commercial property?
If everything is handled correctly, investing in commercial property will be profitable. First, adding commercial real estate investments to your portfolio will help you reach the next level of financial success and increase your income.
You are going to require a mindset that is comfortable with taking chances. You ought to also consider the more distant future. Answer “yes” to both questions and conduct research to determine which form of commercial real estate will most benefit you, your company, or your current financial situation. Investing may be the best choice for you.
