What Are The Benefits of Investing IN Commercial Real Estates?
While thinking of real estate investment, many of you overlook the opportunity of investing in a commercial property, one of the primary reasons being lack of knowledge. However, it is one of the profitable investment opportunities in the present times. Apart from helping you to make more money, it can also broaden your investment horizons. Read on to find out the benefits of investing in a commercial real estate.
Commercial real estate – What it means
A commercial real estate can be defined as a property, which is leased out in order to provide a workspace rather than a place to live. It includes office buildings, hotels, restaurants, apartment complexes, shopping centers, etc. In short, a commercial real estate is any property other than a single-family home or a single-family plot.
Benefits of investing in commercial real estates
There are 3 benefits of investing in a commercial real estate in comparison to investing in residential properties. The benefits are discussed below.
- Value not determined by sales comparison approach: Unlike residential real estates, the value of a commercial real estate is not determined by sales comparison approach. Therefore, you can ask for more even if a similar commercial property in the same locality is sold in a much lesser amount.
- Increased cash flow: In comparison to residential real estates, you can earn even if some of the commercial units are rented out. In this way, you can have a continuous source of income even if you’re not able to rent out all of the units.
- Comparatively long lease contracts: Typically, commercial real estates are for longer lease contracts. The minimum lease period of a commercial property is of 1 year and it may last for 10 years or more. This is quite advantageous as it offers a stable amount of cash flow as long as the tenant occupies the unit.
However, you should have a sound knowledge in commercial real estate investment in order to earn significant profit. It is advisable that you hire an experienced professional if you don’t have adequate knowledge in how to maximize profit by investing in commercial properties.
Disadvantages of investing in commercial real estates
There are primarily 2 disadvantages of investing in a commercial real estate. First of all, the taxes and maintenance responsibilities for commercial properties differ according to state, county and even from one industry to the other. Therefore, you may need a professional who have sound knowledge in these matters. Moreover, unlike residential properties, the requirements of the tenants are not same in case of commercial properties. Therefore, the renovating cost may increase as per the requirement of a new tenant.
Commercial real estate investment is quite a risky investment through it can yield high profits. Therefore, it usually appeals those who look for a challenging investment opportunity. However, if you’re ready to take the challenge but don’t have enough capital, then investing in a REIT (Real Estate Investment Trust) may be a suitable option for you. In this way, you can still enjoy the profits of commercial investing.