Many people are used to purchasing residential real estate because they want to gain the benefits of real estate investments, but commercial real estate investments are actually better in terms of return of investment. Even if you already have residential estate investments, having commercial properties can help in balancing your portfolio. Get ready for a primer by knowing all the rules and terms when it comes to commercial real estate investments. Allow us to share with you some insights regarding the differences between residential and commercial real estate properties.
Unlike the income you can generate from residential properties, the value of commercial real estate properties is directly related to the usage square footage. Diversify the risk of real estate investments by investing on commercial properties. For instance, if you own an apartment complex and you lose two of your 20 tenants, then you only lose a portion of the income instead of the entire rent as you would lose in a single-family residence. Cash flow is higher owning a commercial real estate property because you have it leased or rented per square footage, and more tenants you have, the greater cash flow it is, generating more income than what you can get by owning a single family dwelling. Commercial real estate property investments provide more stability on your cash flow because their leases are generally much longer than residential leases. Banks and other financial institutions value commercial real estate properties differently, needing higher down payment than residential properties.
Conducting a thorough research is very important before you invest in a commercial real estate property so find out the vacancy rates of previous owners and talking to storefront managers to find out what they like and about their business. Are they still interested renewing their leases? What are the things they like about the previous management? What is the success rate of each tenant? Are there any residential properties currently built in the area? What is the demographic profile in the area? You may want to also ask the status of the cash flow from the tenants. It can be rewarding understanding the ins and outs of commercial real estate investing.
Do you have plans buying a commercial property this year? It must be the right time to start owning a commercial property. Now more than ever, start considering owning a commercial property because there are a lot of benefits owning one. If you want to know more about real estate investments, feel free to check our website or homepage now. Embrace commercial property investments and become a successful real estate investor.