Whether you are going straight into commercial real estate investing or ready to advance from residential to larger, more profitable deals, there are many pros to taking the plunge and investing. However, rushing into big deals or making rash decisions regarding buying properties, could be risky and even disastrous, putting you further into debt without making profits.
Successful ventures involve efforts in research, developing the right connections in the industry and most importantly, identifying the right type of investment.
Listed below are some positive reasons to invest:
- Income potential: the most convincing reason to enter into investment sales in the commercial market versus the residential market is the earning potential. Commercial properties typically have a higher annual return off the purchase price possibly between 6-12% compared to residential homes which can be much lower at 1-4%. All of these factors and percentages are dependent upon the area.
- Flexibility in lease terms: you will have more flexibility in your lease since there are fewer consumer protection laws governing commercial leases in comparison to the many state laws that govern residential leases with security deposits and termination rules.
- Triple net leases there are many variations to triple net leases but the general idea is that the property owner is typically not responsible for the property maintenance or the real estate taxes on the property which is normally paid by the lessee. The only expense you may be responsible for is your mortgage on the property.
- Price evaluations more objective it can be easier to evaluate the prices of commercial property simply because there is a paper trail from the current owner’s income statement. With the help of an experienced broker, the asking price should be set so the investor can earn close to the area’s current cap rate for the commercial property they are interested in.
Taking into account all these positive reasons to invest will assist you in choosing the right property which best suits your needs for a successful venture.