Many people are used to purchasing residential real estate because they want to gain the benefits of real estate investments, but commercial real estate investments are actually better in terms of return of investment. A great way to balance your portfolio as a real estate investor is investing on commercial real estate properties. All you need to do is research and know the rules and terms when it comes to commercial real estate investments. Let us get into the details on the differences between commercial and residential real estate properties.
Unlike the income you can generate from residential properties, the value of commercial real estate properties is directly related to the usage square footage. Commercial real estate properties can help in diversifying the risks. For instance, if you own an apartment complex and you lose two of your 20 tenants, then you only lose a portion of the income instead of the entire rent as you would lose in a single-family residence. Cash flow is greater with commercial real estate investments because you lease the property and if you have more tenants, you generate more income than what you can get by owning a single family dwelling. Because commercial property leases are generally much longer than residential leases, this greatly helps with your cash flow’s stability. Banks and other financial institutions value commercial real estate properties differently, that’s why they require higher down payment than residential properties.
Conducting a thorough research is very important before you invest in a commercial real estate property so find out the vacancy rates of previous owners and talking to storefront managers to find out what they like and about their business. Are they still planning to renew their leases? What did they like about the previous management? What is the success rate of each tenant? Are there any residential properties currently built in the area? What are the characteristics of the general population or demographic profile surrounding the commercial property? It is also a good idea asking for the cash flow of the sellers or tenants in the commercial property. Don’t be afraid to invest and research on commercial real estate properties, because it is really rewarding understanding the ins and outs of commercial real estate investments.
Are you considering investing in a commercial property today? This must be the right time for you to consider investing in commercial real estate properties. Now more than ever, start considering owning a commercial property because there are a lot of benefits owning one. Allow us to help you learn more about real estate investing by visiting our website or homepage now. It is time to embrace investing in commercial properties and become a successful real estate investor.