When you think of property investment, most people tend to consider only the residential real estate type of investment. To be fair, residential real estates offer a variety of choices, from manor houses to small holiday combos, so there is still a lot to investigate and trial. But there’s another type of property that can provide a very profitable return, and it is commercial property.
A commercial property doesn’t have to be an isolated plant in an industrial estate. It could also just be a set of office in town in a trendy building, so there’s no need to develop specialist skills to appreciate the value of these properties. The real question, however, is: How can commercial properties become a profitable investment, and more importantly how do you make them work for you? Thankfully, you’ll be pleased to know that commercial properties can be managed in a similar way to residential properties. The only thing you need to keep in mind is that when you are screening your tenants, you’re not screening the charming couple next door but a real business instead.
#1. Get Things Right From The Start
Commercial rentals can be handled just like residential rentals, in the sense that you need to consider the location, the state in which the property is, and the kind of tenants you pick. To take a simple example, an office on an isolated industrial estate will not attract the same kind of businesses than an office in the middle of town. While both have their advantages, you need to know exactly what kind of tenants you want and what kind of income you want to receive.
To put things clearly, rentals in town tend to be more expensive because they are closer to other activity centers. Additionally, a commercial property that comes with parking premises will also be rented at a higher fee, compared to a countryside property that has no pre-built car park. Additionally, you need to maintain the property in good condition at the time of the agreement, so it’s best to pick a property that doesn’t need any repairs – you’ll underneath that property maintenance doesn’t have to be your responsibility depending on the kind of agreement you have with your tenants.
#2. The Differences Between Rental Vs. Lease
There are two main types of commercial agreements, being a rental or a lease agreement. Rentals tend to be set with no period of residence so that at the end of each month, you and your tenant are free to modify the agreement. Lease agreements have a set term during which the tenant can occupy the property. In both these cases, the landlord is responsible for the property maintenance. However, for the absolute triple net lease, or the triple N lease, the tenant is responsible for the building maintenance, the insurance and the property taxes. It’s the equivalent of giving your tenant landlord’s duties for a set period. It’s considered advantageous by landlords, but this can backfire if the tenant doesn’t maintain the building.
#3. Commercial Property Beats Real Estate Investment
In comparison, commercial rentals are a lot more profitable than residential ones. Indeed, as an investor, you will find it easier to purchase affordable commercial properties that are in great condition that you would for a home. Additionally, the monthly rent for a commercial building, or even an office without a building, has a higher return than renting a residential home to a family.