Considering Investing in Commercial Real Estate?

Many investors feel more comfortable investing in single family homes instead of commercial property, so why should they consider investing in commercial properties?

First off commercial property will generally produce a higher rental return than single family homes can, especially when you take into account if you have one single family home and it is vacant for a period of time you have a 100 percent vacancy factor. Compared to a office property with five suites and one of the five is vacant for a period of time you have a 20 percent vacancy factor.

While it is true, when commercial tenants move out, new tenants nearly always require improvements to customize the space to meet their planned usage fo the property, but unlike residential tenants commercial tenants will likely sign multiple year leases as opposed to a 6 month or 1 year lease that is more common with residential tenants

Supply and demand would be another factor, there are more single family homes than office properties for example. As we come out of the current economic downturn which should appreciate sooner, a single family home (which is an expense for the tenant) or a suite in an office property ( a tax deductible business expense needed to Produce Income for the tenant)?

Investing in commercial property need not be intimidating, I believe the most important thing you should do is to assemble a team of experts that can provide you the information to make informed decisions.

Leave a Reply

Your email address will not be published. Required fields are marked *