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Pros & Cons of Investing in Commercial Real Estate

  • Nov 17, 2022
  • Real Estate
invest in commercial real estate

 

Commercial property investments can be a great way to secure your financial future. There are many reasons to invest in commercial property, including the potential for high returns, the security of owning real estate, and the ability to diversify your portfolio. 

 

Here are few reasons why commercial property may be a wise investment for you.

 

  1. Income Potential - When you invest in commercial property, you have the potential to earn a lot of money. Commercial properties tend to be more expensive than residential ones, so if you're able to rent them out, you could make a significant profit.
     
  2. Professional Relationships - When you invest in commercial property, you'll likely need to form professional relationships with other businesses in order to succeed. This can be a great way to network and build connections that may be beneficial in the future.
     
  3. Public eye on the property - When you own commercial property, it's likely that the public will have some level of interest or awareness in it. This can be good or bad depending on how you look at it, but it's something to be aware of.
     
  4. More objective price evaluations - Because commercial properties are generally more expensive than residential ones, it's important to get a professional evaluation before making an offer. This will help you ensure that you're not overpaying for the property.
     
  5. Triple net leases - When you lease commercial property, you may have the option of signing a triple net lease. This type of lease means that the tenant is responsible for paying all three of the following:

    - Property Taxes, Insurance, and Repairs/Maintenance.

    While this can be beneficial in some ways, it's important to be aware of the potential financial burden it could place on your tenant.
     
  6. More flexibility in lease terms - When it comes to commercial property leases, there is generally more flexibility than there is with residential leases. This can be beneficial if you're looking for a certain type of tenant or want to negotiate different terms.

 

The Downside of Investing in Commercial Property:

 

  1. Limited hours of operation - One downside of commercial properties is that they typically have limited hours of operation. This can be frustrating for tenants who may need to access the property outside of normal business hours.
     
  2. Time commitment - When you invest in commercial property, you need to be prepared to commit a significant amount of time to it. This is necessary in order to find good tenants, keep up with repairs and maintenance, and handle any other issues that may arise.
     
  3. Professional help required - Unlike with residential property, investing in commercial property generally requires the help of professionals. This includes things like hiring a lawyer and an accountant to help you navigate the process and ensure that everything is done correctly.
     
  4. Bigger initial investment - As mentioned above, commercial properties tend to be more expensive than residential ones. This means that you'll need to have a larger down payment and monthly budget in order to afford a commercial property.
     
  5. More Risk - When you invest in commercial property, you're generally taking on more risk than you would with a residential property. This is because there are more variables to consider, such as the health of the economy and the stability of the commercial real estate market.

 

Hello! I'm Jay Thomas, A REALTOR in Houston, Texas. Chances are you and I share a similar passion, Real Estate! I also have a passion for building businesses, working out, inspiring others, technology, sports, and people. Connect with me on Facebook and Instagram!

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