In the world of real estate investing, the options can be dizzying.
Before you get so overwhelmed you decide to not even try it out, I’m here to make it easy for you.
Investing in commercial real estate has many advantages over residential.
I’m here to break those advantages down for you and give you some tips on getting started on your very own real estate riches!
When it comes to investing in real estate, the profits can be massive and long-lasting.
You just need to pick the right piece of real estate, and that decision often begins with whether you want something commercial or residential.
Now residential can often seem tempting since most individuals have at least a little experience in that area, considering we all have to live somewhere.
However, if you can step outside of your comfort zone and consider a commercial property, your leap of faith may be richly rewarded.
To start with, yield is usually higher per square foot in commercial properties when compared to residential.
In general, commercial properties have an annual return off the purchase price around 6% and 12%, which is far higher than the average annual return of a residential property.
Another advantage to investing in commercial real estate versus residential is the relationship between landlord and tenant.
In commercial real estate, your tenants are actual businesses, which allows for much more professional interactions between you and your tenants.
This is also a positive considering business owners will want to always present their best, so the property in general will be much better taken care of than if you were leasing out apartments, where people are doing who knows what to their homes.
Business owners want to keep their offices and shops clean and welcoming and orderly, so you have less to worry about in that arena.
Leasing commercial spaces also means there is limited hours of operation, since businesses close at the end of the day and workers go home.
This means there’s less hours in the day that you have to wear your landlord hat, and you won’t have to worry about phone calls from your lessees in the middle of the night like residential landlords do.
Something to keep in mind when making the jump to commercial real estate investing is that everything does take longer.
Reviewing properties and due diligence can take months compared with the days it takes in residential real estate.
Finding tenants for commercial properties can also take longer, as well as conducting renovations.
However, despite those inconveniences, the leases are also longer when compared to those in residential real estate, so once you find that perfect lessee, you won’t have to worry about finding another for years.
So, if I’ve convinced you to take a leap outside of your comfort zone and get in on the gold mine that is commercial real estate, here are some helpful tips to remember when getting started.
First off, find out what the time frame is for all city approvals. It can take months to sometimes years to receive a building permit, and you’ll want to know that before you purchase a property.
Set up a meeting before you buy any space with local authorities and go over all of the required approvals and how long they take to get approved on average.
You also need to consider area demographics and trends, and make sure that there will be businesses wanting to rent your space once everything is up and running.
Once you’ve bought the property and everything has been approved, you need to find good lessees.
While you may not know ahead of time what makes a good lessee in commercial real estate, I can help you know which potential businesses you should avoid renting to.
Any failing businesses or businesses in declining industries should be avoided.
No offense to them, you’re just safe-guarding yourself and your investment.
In the case of restaurants, grocery stores, and bars, you can assume they will likely default on their lease at some point, and you should be prepared for that possibility.
Ideally, it would be better to avoid that headache all together, and not lease to such businesses.
Real estate is an excellent investing field, and commercial real estate in particular can deliver huge returns without forcing you to work alternate hours.
So, don’t miss out on your very own golden ticket, and the key to your ridiculously easy, ridiculously large profits!