Are You Ready For Commercial Real Estate Investment?
There’s no doubt that investment in real estate is one of the most lucrative and reliable available to you. However, one mistake that a lot of people make is that they tend to assume that the only real estate investment available to them is residential real estate. Sure, residential properties are often the best option for a lot of first-time investors.
But if you’re looking for a way to grow your investment career then it might well be worth looking into commercial real estate. Of course, as beneficial as commercial real estate can be, that doesn’t mean that there aren’t challenges involved. With that in mind, here are some things that you will likely need to consider when deciding whether to invest in commercial real estate.
Different types of leases
One major difference between commercial and residential properties is that there are a lot more options for the kinds of leases that you want to use when renting a commercial property out. They have various benefits and drawbacks but the most common that you will likely use are gross lease and net lease.
A gross lease features all-inclusive rent and covers all necessary expenses on the property. A net lease will often feature a lower rate of rent but the responsibility for upkeep and expenses will fall on the tenant. There is no definitive “right” answer for what kind of lease you should choose. It’s simply a matter of understanding your own requirements as an investor.
Commercial properties can often require a lot more responsibilities in terms of management for an investor than residential ones. This is especially true when it comes to security. After all, a commercial property is often at much higher risk in regards to their security than residential properties.
Fortunately, there are plenty of things that you can do to make managing your properties far easier. Whether that’s ensuring that you have access control for property management or working with a dedicated property manager, being able to take the best possible care of your property is essential. After all, it’s only natural to want to protect your investment.
Another significant difference between residential and commercial property investment is that commercial tenancies will generally run for a lot longer than typical residential tenancies. This can often be incredibly useful since it limits the chances of your property being empty more frequently.
However, the other side of that is that there is a higher chance of your property being empty for a longer period of time. The reality is that it comes down to you to weigh up the potentials risks and benefits of any property you choose.
It is essential that you remember that, as with practically any form of investment, commercial real estate does not come without risks. Investing and risk go and in hand and you need to be willing to take on those risks if you want to build your investments in any significant way. However, staying informed about the particulars of any given investment opportunity is the best way to minimize that risk as much as possible.