Whether you’re inexperienced in Clayton real estate investing or have owned rental properties for some time, you may be seriously considering about becoming a commercial property landlord. For various investors, this is not a choice that should be done easily. The reason for this is that owning and managing residential rentals is very different from owning and managing commercial properties.
By its meaning, a commercial property could cover retail, industrial, office buildings, and apartment and mixed-use buildings. To properly manage these kinds of buildings, there are several things you need to know. Prior to deciding if investing in commercial properties is great for you, it’s essential to think of both the pros and cons of doing so. Onwards, we’ll get a closer look at both, and endow some tips on what it takes to evolve to be a good commercial property landlord.
The Pros
When investing in commercial real estate, one of the powerful pulls for investors is the income potential. Even though your initial investment in commercial property will be much higher than single-family residential rentals, in most instances, you can anticipate and expect a higher annual return on your investment too. A multifamily apartment building with a lot of tenants, for instance, can possibly bring in a rental income exceeding your costs enough to make certain of a tidy net profit each month.
A lot of investors also desire to invest in commercial rentals because it lets you work together with your tenants more professionally and competently. If you own retail or office buildings, your tenants will be business owners, which will aid you to keep your relationships with your tenants polite and professional. Moreover, business owners are more conscientious about keeping their rented spaces in good condition, particularly if they offer products or services to the general public. This can definitely help you more easily maintain your property’s condition over the long term.
The Cons
Besides the benefits of owning commercial rental properties, nevertheless, there are, in actuality, quite a few drawbacks. We’ve already pointed out the larger initial investment you can be expected to produce to purchase a commercial property. But on top of that, there are other, frequently larger, costs and risks that are involved as well.
The more people are making use of a building, the more maintenance and repair it will require. Staying on top of property maintenance for one or more commercial buildings can be a pricey and time-consuming task, so it’s necessary to be certain that you have the budget and the dedication to do it.
Another risk connected to commercial rental properties is the risk of injury. Same as larger numbers of people will increase maintenance costs, it likewise amplifies the chance that someone will be hurt or cause intentional damage to the building and grounds. Not only will you require excellent quality insurance to help protect you from such risks, but on the other hand, it may even be vital to litigate injury claims or other lawsuits more often. If you are highly risk-averse, being a commercial property landlord may not be perfect for you.
Tips for a Commercial Property Landlord
If you plan to invest in commercial properties for your next business venture, it’s relevant to begin on the right foot. To find positive results as a commercial property landlord, here are a few tips that will help you do a great job:
- Start with Residential Properties. If you are unaware of investing in rental real estate, it can be advantageous, to begin with, single-family rental properties prior to moving to commercial buildings. Possessing single-family properties may be rather slower-paced and may also be less demanding
- 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 for a long time, but you can also definitely keep the value of your property intact.
- Mitigate Risk. If you haven’t already, you should take measures to bring your property up to code, primarily where your tenants’ health and safety is concerned. Think of putting an alarm system, sturdy locks, and even a fire sprinkler system, if suitable, to help you effectively manage risk.
- Learn to Negotiate. Commercial leases are really less predictable than those used for residential rental properties. In fact, everything can be negotiated. Not only will you require an expert you can trust to help you draft your lease documents, but more importantly, you can and should work with your tenants to achieve an agreement that will be beneficial to everyone.
In the long run, only you can decide whether investing in commercial rental properties is a good choice. Many commercial property landlords find the job tedious, with competing demands on their time. Nevertheless, the benefits can make all the work and efforts worth it.
Are you hoping and looking to add a new investment property to your portfolio? Real Property Management Excellence is your solution. Our Clayton 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 919-827-1107 or contact us online.
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