Whether it is commercial or residential property, investing in either of them can prove to be fruitful. If you have the correct perspective, abundant patience and the necessary skills, then investing in real estate can be beneficial. Success in commercial estate investments requires the willingness to research and develop the essential relationships and identifying correct investment choice. Commercial property investment can be beneficial; however you must know the pros and cons so as to make the right decision.
What is commercial property?
Property that is used solely for business purposes is termed as commercial property. It is one of the major properties out of the three main properties. Other properties include residential real estate that is used for living purposes and other is an industrial real estate that is used for manufacturing and production purposes. Many Kansas City real estate agents deal with all the transactions related to commercial properties.
The businesses that have commercial real estate usually lease the occupied space. Commercial properties include,
- Office buildings
- Ware houses
- Retail buildings
- Apartment buildings
- Industrial buildings
- Multi purpose buildings
The main question that arises is that, whether investing in commercial property a right decision? For coming to any conclusion, you need to know the pros and cons of investing in commercial property.
Pros of investing in commercial property
Investing in commercial properties has many benefits the most important being financial potential. Commercial properties have an annual return off the purchase price around 10%, depending on the area.
- Professional relations
Commercial property owners are usually not individuals, but LLC’s. The property owner and tenant have a very formal relationship, which keeps the interactions professional.
- Limited hours
Businesses generally wrap up before night time. Generally, alarm system is operated by such companies in order to handle emergencies.
- Price evaluations
It is easy to predict the price of commercial property because you can request to see current owner’s income statement and then determine the probable cost of the property. The evaluation of property cost is based purely on professional terms. In case of residential properties, the cost is often based on emotions.
If you are the property owner, you do not need to handle or pay any expenses for the property, except the mortgage cost. The lessee handles the essential expenses like real estate tax and any additional costs too. There is also more flexibility in lease terms for commercial properties. There are less consumer protection laws for commercial lease. There is no security deposit limits or termination rules and regulations that are applicable to residential properties. Hence, transactions become easy and fast.
Cons of investing in commercial property
You have to manage your property more efficiently and worry more of the public eyes.
- Professional help is necessary
Handling the maintenance issues is wearisome and for that professional help is required. You will need professional to handle all sorts of emergencies and urgent repairs. This in turn will add to your maintenance expenses. Property management companies charge anything between 7-10%
- Huge initial investment
Purchasing a commercial property requires huge initial investment as compared to residential property. Once you acquire the commercial property, there is much initial expenditure that follows.
- Do your homework
After looking at the advantages and disadvantages of getting a commercial property, it is time for you to do some survey and market research. Apart from the above mentioned points, you also need to take into considerations the location of the commercial property, purpose of acquiring the property and long term benefits.