With many recent changes in tax and fee charges for landlords, it’s not surprising that investing in commercial property is becoming an ever-increasing option for investors and proprietors. But, as with any other business venture, it is important that you weigh up both the benefits and costs before investing any money into commercial property.
No matter if you are a highly experienced property owner looking to expand on your portfolio or if you are trying out new investment opportunities, making an investment in commercial property may well be your key to a bright future within the property market. Here are 5 reasons why you should be investing in commercial property.
It Provides a Steady Income
The yield on commercial property is often much higher than that which is on residential properties, in both per square foot and initial investment basis. This is true if you are deciding to rent or lease a multi-unit commercial property, as the more tenants you have, then the more income you can generate.
With the right location, commercial properties can often expect a return of around 6-12% of the original purchase price. This is much higher when compared to a single-family rental home, which can expect just 1-4% of the annual return. As commercial real estate leases are, typically, much longer than residential leases, then predicting your year-on-year cash flow is easier.
Spreads The Risk
Diversification is often the key to minimizing any potential loses, therefore by investing in commercial property, you have help to reduce your risk.
If you were to invest all of your money and time into residential property, then one hit or dip in the market could leave you in a very difficult position. But, if you spread your investments across several other areas, for example, commercial property and shares, then you will be in a much stronger position.
If one of the markets was to crash then you will have other investments to fall back on. Depending on the original nature of the commercial premises, then it may be possible for you to let two or more tenants, which further spreads the risk of the property ever becoming fully vacant.
Building Better Relationships
The relationship between a property owner and commercial property tenant will be strictly business-to-business and, therefore, is often much more professional than dealing with a residential tenant. A commercial tenant will usually only occupy the premises during business hours, which means you are unlikely to have to deal with late-night call outs for maintenance or building issues.
Make Changes to Your Office Space
As a commercial property owner, you will have control over any changes made to your office space. This means that you are able to make and change any modifications and alterations as you see fit, as you own the building.
It is often much simpler and far easier to obtain the necessary planning permissions when making changes to a commercial building than it is for residential property and, as the landlord, you are able to oversee these changes. As you are in charge of these changes, you can improve the fittings and layout of the building so that if you were to let go of the lease later, then you may get better returns on your investment.
In general, property is considered as one of the safest investments you can make, as property values usually tend to increase over time. Therefore, you are more likely to make a good return on your investment, as well as the rental income you will be generating.
This is true with commercial property, especially if you are proactive in your property management tactics as you can increase your profits, reduce your costs and maximize on your returns.
However, you should not assume that owning commercial property is going to bring a constant high return on your initial investment. It is wise to do your research before you decide whether a property is going to be a smart purchase. Before investing any of your money, have a look at the property history and be sure to investigate any potential tenants. If you are sure that the fundamentals of your property are sound, then investing in commercial property is sure to be a nice addition to your investment portfolio.