Any property, whether it’s residential or commercial, can be an excellent investment prospect. For your money, commercial properties typically present more financial rewards than residential ones, such as rental single-family homes or apartments, but there also could be more risks. To help you make the right investment decision, here are some of the potential benefits and drawbacks of investing in commercial properties.
A good reason you should invest in commercial properties over residential ones is the earning prospects. According to Sentinel Property Group, commercial properties usually have a yearly return of the investment price between 5% to 12%, subject to the location, which happens to be a much better range than what prevails for family type properties (1%- to 4% at best).
Small business proprietors take pleasure in their enterprises and want to secure their livelihood. Proprietors of commercial assets are not individuals, but limited companies and manage the asset as a business. Therefore, the tenant and landlord have more of a business to business customer relationship, which facilitates in keeping interactions courteous and professional.
Retail tenants have a curious interest in preserving their retail store and storefront, because if they do not, it will impact their business. Consequently, property owner and commercial tenants’ interests are aligned. This helps the owner improve and maintain the quality of the asset, and eventually, the worth of their investment.
While there are many positive prospects to invest in commercial property over a residential one, there are also unfavourable issues to think about.
If you have a commercial building with six tenants, or more you need more time to deal with them compared to a residential investment.
Purchasing a commercial property requires more funds up front than obtaining a residential property in the same location. In the constantly changing environment of commercial investment, it’s important; you seek the advice of a competent real estate adviser to advise you accordingly.