If you’ve been debating about what to invest in, have you considered commercial real estate? There are a lot of benefits of putting your money into any type of property, whether it be commercial or residential real estate.
Maybe the local strip mall is for sale, a small ma and pa shop that is close to shutting down that you want to keep alive, or you’re taking the plunge into the New York City commercial real estate market. No matter what type of commercial property it is, it may be worth your investment.
But each investment has pros and cons to weigh before making the final decision. Let’s take a look at some of them to help you decide if you should invest in the commercial real estate.
What Does Commercial Real Estate Mean?
First, you need to understand what it means to invest in commercial property. There are many different types, including:
· Office buildings,
· Retail shops,
· Industrial properties,
· Multi-residential buildings.
These are only some of what a commercial property may be. You’ll want to know what type of commercial property your future investment is so you know if it is worth your while.
Pros for Investing in Commercial Properties
Let’s look at some of the reasons why you should invest. The first is the income potential. The commercial real estate is businesses of some sort that produce an income. Typically the annual return of investment for a commercial property is higher than what you would see from residential investments. Plus depending on the area of the property can determine how much more (or less) you could get on your return.
Investing in commercial real estate tends to be less of a risk compared to other investments like stocks and bonds. They do not fluctuate as the market does, or as frequently. Commercial real estate flows with the inflation rate. This makes the market less volatile because there is a good chance of real estate holding its value for a more extended period.
Cons of Investing in Commercial Properties
With advantages, there is bound to be some disadvantages. The same is true when investing in the commercial real estate. One of the first headaches is tenant turnover. Unlike residential real estate that for the most part is always in need (families need somewhere to sleep), not everyone needs to rent a commercial property.
Not only could finding a tenant to take the space from your previous tenant be difficult, but it may also require renovations to attract someone new. Say you had the property set up for offices. They may not have seen a lot of the public, so the space was more closed off. Now you have a hair salon looking for a place to rent that would need to have a more open concept. Each business is different and requires a unique space for their needs.
Just like with any investment, there will be advantages as well as disadvantages. You will need to way out the options on both sides of the scale to determine if investing in the commercial real estate is worth it for you.
