Contact

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!

Related Blog

Real Estate Investing
3 Real Estate Investing Tips to Kickstart Your Portfolio!
  • Mar 28, 2023
  • Real Estate

Looking to kickstart your real estate investing portfolio? Check out these 3 tips to get started on the right foot and maximize your returns!...

read more
Real Estate Investment
Secure Your Real Estate Investment: 2023 Recession-Proof Housing Market
  • Mar 22, 2023
  • Real Estate

The Real Estate market is a tricky landscape to navigate, especially in times of economic decline. In our current climate, it’s important now more than ever to be wary of where you invest and mak...

read more
Real estate investment in Houston TX
Real Estate Investment Is Best with an Agent who is also an Investor
  • Mar 21, 2023
  • Real Estate

Investing in real estate can be daunting, but with an agent who's also an investor, you get insider knowledge and guidance. Discover why it's a smart move. Read more....

read more
Benefits for Houston REI BRRRR
HELOC vs. Hard Money Loans: Benefits for Houston REI BRRRR
  • Mar 17, 2023
  • Real Estate

Discover the benefits of HELOC and hard money loans for BRRRR investing in Houston. Learn how to maximize your real estate investment returns today. Read more....

read more
FHA Mortgage Insurance Premium (MIP)
FHA Just Got Even Better With a 30 Basis Point Reduction in MIP!
  • Mar 16, 2023
  • Real Estate

The FHA Mortgage Insurance Premium (MIP) is an insurance policy that protects lenders against losses in case the borrower defaults on their loan. This policy is required for all FHA-insured loans, ...

read more