Buying a property whether commercial or residential is an excellent investment. Commercial real estate is far more rewarding financially than residential real estate, but it is riskier. However, commercial property investment is worth considering. If you are looking to buy commercial real estate, it’s not a decision you will want to take blindly. It’s crucial to research the market as well as the benefits and risks you may encounter while buying an industrial property.
Understanding the advantages and disadvantages of investing in industrial property is essential to make the correct decision. Below we’ve listed the advantages and disadvantages of buying commercial real estate:
Positive Reasons to Invest in Commercial Property
The positive reasons to buy commercial properties are:
High Income Potential:
Commercial Real Estate has much higher earning potential than that of residential property. The rent yield is nearly double from the commercial properties. The income from the industrial property is regular and more consistent as the rental is assured and the lease duration is longer. This is the most significant advantage of buying commercial property over residential.
Buying commercial property is a great way to build a professional relationship. Owners of the commercial property are usually a bank, companies, or corporate chains and dealing with these entities is more comfortable as you don’t have to run around to collect the rent. Also, the landlord and tenant can have more of a business-to-business talk which builds a professional relationship.
Limited hours of Operation:
Businesses usually don’t operate at night; they often work 9-5 range. You won’t get any emergency calls at night for fire alarms or break-ins, you will be able to rest at night without worrying about a midnight call. Commercial properties also have proper security and the property management companies employed, so there are fewer chances of disturbance due to middle-of-the-night catastrophes.
The Cons of Investing in Commercial Property
With a lot of positive reasons to buy commercial real estate, there are also some negative issues to pay attention to:
Bigger initial investment:
Purchasing a commercial property requires more capital than acquiring a residential property, so it’s more challenging to make such a big investment. One must be prepared to make such a large investment after managing all of his/her other financial expenses and commitment. Even though the initial cost is high, the gains in revenue outweigh the cost.
Expert help required:
Investment in commercial properties requires professional advice. You must hire a commercial real estate agency to help you buy the best commercial property. After purchasing the property, you will need someone to handle the maintenance issues and emergencies as you cannot be there anytime. Considering these costs are essential when evaluating the price of the commercial property.
Difficult Finding a Tenant:
Finding the right kind of tenant for commercial property is slightly difficult than finding a tenant for residential property. The property is likely to remain vacant for a more extended time when one tenant moves out. The tenants look for proper amenities and facilities, and it can be challenging to convince them. In this situation, you can take professional help to get your property rented.