3 Reasons To Invest In Commercial Real Estate
When you think of investing in real estate, it’s like that it’s residential real estate you’re considering. You want to buy a house or an apartment and either live in it, paying off the mortgage until you can sell it for a profit, or you rent it out, making money as a landlord.
However, while this is perhaps the norm, it’s not where the real money is when it comes to property. If you want to make a bigger profit, you’ll need to buy commercial real estate, not residential. Although it costs more initially, the rewards of buying commercial real estate are much higher, and overall you’ll make a lot more money. Read on to find out why it’s an excellent idea to invest in commercial real estate.
Fewer Landlord Expenses
Being a residential landlord isn’t all about an easy life and seeing your money increase every time the tenant pays you their rent, especially when you think about how that rent has to cover not just your mortgage but your property taxes and any insurance you have on the piece of real estate as well. In some cases, you might even be making a loss.
Commercial real estate has fewer expenses associated with it, and the rent can generally cover those that do exist since you can charge more. Depending on the lease structure, you should be paying out less than if you bought residential property, and having a good commercial real estate attorney like Jacob A. Krupp on your side will make things even easier.
There can indeed be a greater risk in commercial real estate; an empty office building will cost you more than an empty apartment or even house would. Yet although there is a greater risk, as long as you can cover that risk, the rewards are much greater too.
When you compare the typical returns that come from a residential property to those expected of a commercial property, you’ll see that the commercial real estate will give you much more. That means you can use that money to go on and buy more commercial property, expanding your portfolio and minimizing future risk while improving your income dramatically.
The standard residential lease is going to be 12 months, and although this can be lengthened each year, as a residential landlord you don’t know which year is going to be the last and when your tenant is going to move on, forcing you to spend time, effort, and money finding a new one, all the while receiving no income because the property is empty.
In commercial real estate, the leases tend to be much longer, and ten years for a commercial lease is not uncommon. This is because when a business is working from a specific building and address, they want to stay there for their employees and customers. This means that you can rely on their income for a much longer amount of time, and in the meantime, you can be sure that, once they do vacate the building, it won’t be hard to find new tenants since new businesses are being created all the time.