5 Reasons Why You Should Invest in Commercial Real Estate
harkins / February 3, 2016
Any type of property can be a good investment. But there are some aspects of commercial real estate that may make it a more desirable investment than residential.
Commercial properties are buildings that are built to run a business rather than houses. These include retail buildings, office buildings, warehouses, industrial buildings, apartment buildings, and mixed use buildings that can be used for retail, office, and apartments.
Here are five reasons why you should invest in commercial real estate.
Commercial properties have a much higher income potential than residential properties. Though it depends on the area, they generally have an annual return off the purchase price between six percent and 12 percent. That’s a much higher range than typically exists for single-family home properties, which range between one percent and four percent at best.
The owners of commercial properties are usually LLCs instead of individuals. So the landlord-tenant relationships have more of a business-to-business customer relationship. This helps to keep interactions professional and courteous.
Limited Hours of Operation
As the landlord of a residential property, there is the possibility that you could receive a call in the night about a repair or a lost key. Those fears are much less likely with commercial properties. The tenants of these properties likely run businesses that operate exclusively during the daytime hours so they’ll call you when you’re working. The only time you’d likely be disturbed during the night would be if an emergency occurred, like a break-in or a fire alarm. Even then you more than likely would have an alarm monitoring service that would contact that proper authorities should something happen.
Triple Net Leases
A huge advantage to investing in commercial real estate as opposed to residential real estate is triple net leases. This type of lease, which isn’t available for residential properties, exempts the property owner from paying any expenses on the property. The lessee handles all the property expenses directly including the real estate taxes. As the landlord, you would only be expected to pay the mortgage. Small businesses don’t generally sign these leases but larger companies do to ensure they can maintain the look and feel of their brand.
More Flexibility in Lease Terms
There are fewer consumer protection laws in commercial leases than there are in residential leases. In residential real estate, there are dozens of state laws like security deposits and termination rules that don’t apply to commercial real estate giving you less headaches.
There are several reasons why commercial properties might be the right investment for you. If you would like more information on this potential endeavor, contact the professionals at Harkins Commercial Real Estate to help.
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