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5 Reasons to Invest in Commercial Real Estate

Written by Posted On Wednesday, 26 April 2017 19:29
A picuture of residential flats A picuture of residential flats

If you want to be your own boss and perhaps even start earning a passive income, you’ve probably already given some thought to property investment. Investing in property is one of the best methods of earning a passive income – especially if you are renting to tenants, since the money will come in each month without you having to carry out any work.

But, when it comes to make a money from property investment or development, is residential or commercial property the best choice? For many landlords, commercial property is the way forward. Let’s take a look at some of the main reasons to choose to invest in commercial property. 

Reason #1. Higher Earning Potential

When you invest in commercial construction property , your building will have a much higher earning potential than most residential properties would. This is especially true if you have the means to invest in a multi-unit commercial property, which can then be let out to multiple businesses. In general, optimally located commercial properties can expect to see a return of around 6-12% of the total purchase price annually.

Reason #2. Lower Risk

When renting your property out to tenants, there are always going to be risks that you must deal with. For example, if a tenant fails to make their rental payment or cuts their tenancy short unexpectedly, this could have negative financial outcomes for yourself. When you invest in a commercial property, this risk is lessened. Usually, commercial property rental agreements tend to be stricter, and if you can rent your property out to multiple business tenants, the risk will be even lower.

Reason #3. Less Maintenance Call-outs

Unless you are planning on paying a property management company to do this for you, managing a residential rental property on your own could lead to you being called out to deal with issues at all times of the day or night. On the other hand, since businesses and retailers tend to only operate during normal business hours, there’s a much lesser chance that you’ll be called out in the middle of the night to deal with a burst pipe or broken lock. In addition, many commercial tenants will employ their own maintenance teams to deal with such issues.

Reason #4. Better Tenants

Of course, there are plenty of people out there who are responsible, sensible and caring residential tenants. They will abide by your rules, respect your property, and do their best to look after it. But, there’s always the chance that you’ll find a tenant who is the complete opposite. Investing in commercial property usually minimises this risk. This is because business tenants are usually very concerned about how their office or store appears; they will take great care of it since it’s also in their best interests to impress their customers or clients.

Reason #5. Longer Contracts

In general, when a business moves into a commercial address, they will want to stay there for as long as possible. This is especially true if you are renting out a commercial property that customers can visit, such as a store or high street clinic. Rather than having to deal with residential tenants who may decide to move on to a bigger home at any time, a commercial property often allows you to enjoy years of consistent business with the same tenant. 

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