photo credit: paul bica via photopin cc

Advantages of Investing in Commercial Property vs Residential Property

Real estate is one of those harder subjects to breach when it comes to investing. It often involves a higher degree of capital than other financial instruments that are available. In this post, we are looking at why you should invest in a commercial property instead of a residential property.
First, a definition – in layman’s terms, a commercial property is a building or a space that you rent out to other businesses. You can take a look at TGC to see what kinds of commercial properties are available to lease or buy. A residential property on the other hand can mean condos, apartments, or homes which you rent out to families.
So why should you invest in a commercial property?
• Longer Leases – Businesses normally rent out a space for years to establish themselves within the area or serve as headquarters for their operations. You’ll have a steadier stream of rental income as compared to a residential property – which can turn over every few months or so. Then you’ll need to find a replacement tenant which could mean losses for certain months.
• Better Returns – Businesses normally care about a location first then the price. If your location is central and is prone to foot traffic, then you can command a higher price for rent. Same goes for a residential unit – better location, higher prices. However, people renting a residential property would prefer to live in a more affordably priced unit and would forego location for price.
• Networking Options – With businesses renting your space, you can network with owners or employees, making your relationship into one of a more professional and courteous one.
• Property Valuation – Commercial real estate is valued differently as compared to a residential real property. Considering the recent ups and downs within the market, having a different valuation method can work out in your favor in terms of getting a loan from a bank or if you’re appraising the property.
• Property Owners May Not Pay Expenses on the Property – If you have a space that a company with a significant presence within the country may want to rent, these companies sign a lease stating they will pay expenses incurred like property taxes. They normally do it as they have a particular look and feel that they try to maintain in their branches.

Leave a Reply

(*) Required, Your email will not be published