By description, a commercial property could embody retail, industrial, office buildings, and apartment and mixed-use buildings. There are various things you really need to know to successfully manage these sorts of buildings. Before deciding if investing in commercial properties is right for you, it’s vital to think about both the pros and cons of doing so. Moving on, we’ll check out both, as well as share several tips on what it takes to become a good commercial property landlord.
The Pros
When investing in commercial real estate, one of the solid attractions for investors is the income potential. Though your initial investment in commercial property will be much higher than single-family residential rentals, you can expect a higher annual return on your investment in many cases. A multi-family apartment building with tenants, for example, can probably result in your rental income exceeding your costs enough to make sure of a tidy net profit each month.
Several investors also want to invest in commercial rentals due to the fact that it gets you to team up with your tenants professionally. If you own retail or office buildings, your tenants will be business owners, which will aid you keeping your relationships with your tenants polite and professional. In addition, business owners are normally eager to maintain their rented spaces in great shape, particularly if they offer products or services to the general public. This can help you more effortlessly maintain your property’s condition over the long term.
The Cons
Admittedly, there are various disadvantages to owning commercial rental properties. We’ve already stressed the larger initial investment required to purchase a commercial property, but there are still other, usually larger, costs and risks involved.
The more people using a building every day, the more maintenance and repair it will call for. Staying on top of property maintenance for one or more commercial buildings can be a really expensive and time-consuming task, so it’s relevant to make certain that you have the budget and the dedication to make it.
Another risk associated with commercial rental properties is the risk of injury. Since larger numbers of people will increase maintenance costs, it also increases the chance that someone will be hurt or cause intentional damage to the building and grounds. Not only will you need quality insurance to help protect you from such risks, but on top of that, it may furthermore be significant to litigate injury claims or other lawsuits more often. If you are completely risk-averse, being a commercial property landlord may not be favorable for you.
Tips for a Commercial Property Landlord
If you’ve considered and decided to invest in commercial properties for your next business venture, it’s essential to get going on the right foot. To find a successful outcome as a commercial property landlord, here are a few tips to doing good, successful work:
- Start with Residential Properties. If you are uninformed about investing in rental real estate, it can be beneficial to simply start with single-family rental properties before moving on to commercial buildings. Keeping single-family properties is somewhat slower-paced and could be less demanding overall also.
- Be Proactive About Maintenance. As the saying goes, an ounce of prevention is worth a pound of cure. By staying on top of maintenance and repairs, not only can you keep your tenants in place a little longer, but on top of that, you can equally safeguard the value of your property.
- Mitigate Risk. If you haven’t already, you should take action to bring your property up to code, precisely where your tenants’ health and safety is concerned. Think about including an alarm system, sturdy locks, and even a fire sprinkler system, if suitable, to help you take charge of risk.
- Learn to Negotiate. Commercial leases are actually less predictable than those used for residential rental properties. Nearly everything can be negotiated. Not only will you need an expert you can trust to help you draft your lease documents, moreover you can and should work with your tenants to come to an agreement that will be advantageous to everyone.
Conclusively, only you can decide whether investing in commercial rental properties is a good match for you. The majority of commercial property landlords find the job difficult, with competing demands on their time. But really, the gains can make all the hard, sometimes difficult, work worth it.
Are you wanting and looking to add a new investment property to your portfolio? Real Property Management Metro Detroit is your solution. Our Royal Oak property managers work with investors like you to help you find off-market deals, efficiently manage your property, and much more! You can call us at 248-808-6550 or contact us online.