Pros and Cons of Investing in Commercial Real Estate
Investing in commercial real estate or residential property can be an excellent choice. Both types of investments have advantages and disadvantages to offer. If you have previously been successful in single family residential real estate, you might logically look at commercial property as an option.
Benefits and Disadvantages
Here are a few of the major pros and cons of investing in commercial real estate:
• Pro: Fewer Active Responsibilities – When you rent single family occupancies, you may need to be more hands-on in terms of round-the-clock maintenance and other responsibilities. With commercial properties, your tenants will generally be on the premises only during the business day. Additionally, some commercial leases place the responsibility of property expenses (such as maintenance and insurance) with the tenants instead of the owner. Another potential benefit is that your commercial tenants may sign longer lease contracts than many residential occupants would, sparing you the responsibility of finding new tenants frequently.
• Con: The Potential for Bad Management – Many commercial property investors prefer to hire property management companies to handle tenants and various ongoing property matters. That can be useful unless the company you hire does not do a good job.
• Pro: Better Financing Terms – Commercial property owners typically enjoy more flexibility in regard to financing. You may be able to secure a first or second mortgage with 100 percent financing, which would not be the case for traditional residential financing.
• Con: More Competition – You might find yourself with more competitors to deal with when you are looking for commercial real estate. That could mean paying more than you had planned to secure an investment.
Weigh Your Options Carefully
Investing in commercial real estate can be a lucrative career, and it may also provide you with a solid form of supplemental income. Just be sure to weigh the pros and cons before you decide whether a commercial real estate investment is appropriate for you. If you wish to proceed, talk to Express Capital Financing about getting financed for your next project.