If done the right way, investing in commercial properties can yield significant benefits. Working with reputable commercial hard money lenders can help you secure the funds you need.
Common types of commercial properties include office buildings, retail spaces, warehouses, industrial buildings, and apartment complexes. Some properties may include several types of uses. Investing in such properties can potentially result in a high return.
Any landlord knows that investing in property is far more complicated than just sitting back and accepting the rent. That said, commercial tenants tend to be easier to work with than residential ones.
To begin with, the law allows far greater flexibility in drafting a commercial lease than a residential one. You have leeway in choosing the type of lease and essential terms such as lease termination, security deposits, notice periods, and any other matters of importance.
Further, working with a business generally creates a more professional relationship. Businesses generally have at least the same level of investment as you do in keeping the property in excellent condition and building good relationships with neighbors.
As a commercial property owner, you may be able to use a triple-net lease that shifts most of the property’s expenses to the tenant. This can save you both money and hassle, as the tenant takes care of maintenance and other issues.
Higher Earning Potential
While specific rental income depends on various factors such as the location, property type, and the business that rents from you, returns on commercial properties typically exceed those on residential rentals by a significant percentage.
Better Accuracy in Property Pricing
One can usually assess the value of a commercial property based on specific, objective facts. These chiefly consist of the income the current landlord makes from the property, which is an easily verifiable fact. In contrast, residential properties are often valued based on an assortment of subjective perceptions, which can be hard to untangle.
Control of Appreciation
The value of any investment asset can rise or fall due to factors you cannot control. While this can be true of commercial properties as well, you can also take action to minimize risks and to increase value. Raising the rent, improving the buildings, and obtaining the necessary permissions to add or change a property use are some common ways landlords can add value to commercial real estate.
Help Getting Started
If you need help getting financing for your investment, Capital Fund 1 commercial property loans can provide what you need. Reach out to us online and let us know how we can help.
That’s good to know that you can have more flexibility with a commercial lease than a residential one. I didn’t know that you could write up different types for commercial leases as well. I could see why a restaurant might need a different type of lease than a computer company. I’ll have to consider investing in some commercial property since it sounds like it might be a better option than residential.
A major reason to invest in commercial property is high yields; as commercial tenants often take on many of the costs that landlords would be traditionally expected to cover in the residential market.