Investing in Commercial Real Estate

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Investing in Commercial Real Estate The Good,
the Bad, the Ugly Any type of real estate
investment comes with its own set of pros and
cons, and commercial real estate is no
different. Commercial real estate refers to a
number of different types of properties
including retail buildings, office buildings,
warehouses, industrial buildings, apartment
buildings, and mixed-use spaces which may
include a combination of any of these. In order
to decide whether or not commercial real estate
is the proper investment for you, it is
important to know what you can expect to
encounter, good or bad. The Pros Steadier
Income/Return on Investment The number one
benefit of commercial real estate investment is
the potential for income. Most commercial
properties will average between 6-12 return
annually on the purchase price, as opposed to
the 1-4 range expected from residential
properties. Tax Benefits The list of deductions
available to owners of commercial real estate
goes on and on, though many investors fail to
take advantage of them all. Among the most
prominent are the ability to write off property
mortgage interest, property depreciation,
property repairs and maintenance, travel to and
from the property, and any educational training
or seminars you may attend to help you become a
better investor. This small list barely scrapes
the surface. The Tenants Tenants looking for
commercial real estate have as much, if not more,
interest in the care and maintenance of the
property as the owners. A person leasing a
commercial property will be dependent on the
space attracting quality staff and clientele.
Because of this, they will be far more likely to
maintain the space as it has been leased to them,
and may even invest in further improving the
space for their own business needs. In short,
your tenants interests are far more aligned
with your own than that of a residential
renter. Flexibility in Lease Terms With far
fewer consumer protection laws in place in
commercial real estate (as opposed to
residential real estate), it is far easier to
negotiate leases with your tenants. The down
payment you require, rules of termination should
the relationship not work out, and what costs
are covered by you, the landlord, are among just
a few of the negotiable terms of a lease.
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When you are dealing with residential real
estate, you never know when your phone may ring
in the middle of the night. A perk of commercial
real estate is that the majority of businesses
who will be leasing from you will likely stick to
the same or similar business hours as you do.
This means that, barring an emergency, you are
more likely to have less bother. Cons Bigger
Initial Investment Purchasing commercial real
estate typically requires a much larger initial
investment than residential property. There may
also be costly changes and repairs that need to
be made in order to make the space equipped for
a business to operate efficiently, and many of
those costs may lie with you. Professional Help
Required With the number of tenants and square
footage both typically greater in a commercial
real estate property, there is a whole lot more
to manage. From repairs and maintenance, to
collecting rents, inspecting property regularly,
and negotiating successful leases, you may be
biting off more than you can chew unless you are
willing to delegate some of these tasks. This
can add to the cost of the property, and require
extra time to find the right companies to sub
the work out to. Greater Liability Most
commercial real estate properties will have an
influx of customers, clients, and/or vendors in
and out of the property, which means greater
liability to you should there be an accident.
Although there is obviously insurance that can
help protect you from incurring the cost of any
damages it is important to consider the greater
risk factor here. It Takes Longer to Find
Tenants On the one side, commercial real estate
lease terms are typically longer than
residential, which implies that a property will
have a tenant for a greater length of time once a
lease is signed. That being said, once a
property is vacant, it may remain that way
longer. A tenant is looking for a property that
most closely matches its business needs as far as
property type, location, space, etc., and
finding a tenant whose needs match the exact
specifications of your space can be
challenging. Searching for Commercial Real
Estate in the Baton Rouge Area? To further
determine whether or not an investment in
commercial real estate is a great next step for
you, contact a qualified broker who has your best
interest at heart! At SVNGraham, Langlois,
Legendre, we have over 99 years of combined
experience helping our clients create successful
commercial real estate transactions, from start
to finish. We
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pride ourselves on excellence and look forward to
giving you a superior experience. Take a look at
our properties today and call us to get your
search started! Article Source
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