When people decide to begin investing in real estate, they automatically focus on buying residential property that can be rented out. Often, new investors don’t realize that the risks may be much lower in investing in commercial property. Before making your decision, consider the advantages of investing in commercial real estate over residential investments.
You Can Get a Triple Net Lease
Have you noticed that all McDonald’s restaurants look the same, or every Starbucks building is the same shape? That’s a triple net lease at work and it’s something you can only get, when investing in commercial property. Large businesses will sign this type of lease, which makes them responsible for the upkeep and repairs, because it gives them the freedom to remodel the property to fit their brand. In exchange, you have a property without the usual expenses. Other than your monthly mortgage payment, you’re free from expenses.
You Can Take Nights Off
If you lease to a smaller business, you may not get the advantages of a triple net lease, which means you are responsible for repairs and upkeep. If this is the case, there’s still an advantage over investing in residential property. A home rental means you may get a call at any hour of the day or night, requiring you to make emergency repairs or fulfill some other duty. Conversely, businesses will close for the evenings, freeing you up for those hours.
In many cases, you may be working with professional investors, or benefit from a service, such as those provided by Thomas Mensendiek’s representation. In those cases, you’ll be sharing the responsibilities and the risks. In addition to limiting your losses by sharing the investment, seasoned will be experienced in these types of investors. Their expertise will be helpful in ensuring a successful experience. They know the markets and know how to identify the properties with the best potential.
The Asset Value is Directly Related to the Net Operating Income
When you invest in residential real estate, you’re solely relying on the market value of the property. However, commercial real estate is also backed by the business’ net operating income. The business owner has a vested interest in turning a profit, which means you’re not solely relying on the area real estate market to grow your earnings.
Better Landlord/Tenant Relations
When it comes to residential investments, tenants aren’t as motivated to care for your property and run a greater risk of falling behind on payments. However, a business owner is more motivated to maintain a professional and congenial relationship with you as the landlord. This will make your interactions more positive and can help you feel more confident that your property will be well maintained.
When looking for a new investment, there are many ways to add real estate to your portfolio. When considering commercial versus residential property, there are many advantages that make the former a more attractive offer. Before making a decision, research the market in your area and look to see what commercial opportunities are available in your area.