Benefits Of Commercial Real Estate Investing

Investing in commercial real estate can be very rewarding, both personally and financially. For many, the objective of investing in commercial real estate is for future wealth and security; others utilize it for tax benefits and investment portfolio diversification.

A commercial redeveloper can also take advantage of the following benefits:

Higher Income: The hallmark benefit of investing in commercial real estate is a higher potential income. Generally speaking, commercial properties have a better return on investment, an average of six to twelve percent, while single-family properties fetch between one and four percent. Secondly, commercial real estate provides a lower vacancy risk, as properties tend to have more available units. (Consider this: one vacancy in an office building with 25 commercial spaces will negatively impact an investor’s bottom line more than one vacancy in a residential duplex.) In addition, commercial leases are generally longer than those you will find in residential real estate. This means that, commercial real estate owners have to deal with far less tenant turnover.

Cash Flow: Commercial real estate has one very distinct advantage: a relatively consistent stream of income due to longer lease periods. In addition, commercial properties often have more units than residential properties, which means you can achieve economies of scale and multiply your income streams much more quickly. Known in the industry as a triple net lease, many commercial tenants also pay the building’s real estate taxes, property insurance and maintenance costs, thus increasing your owner benefits.

Less Competition: Another advantage associated with commercial real estate is relatively less competition. Because of the perceived difficulty of commercial investing, the commercial space tends to be less saturated with other investors.

Longer Leases: Perhaps one of the biggest perks of commercial real estate is the attractive leasing contracts. Commercial buildings generally have longer lease agreements with tenants compared to residential properties, which, as previously stated, offers investors impressive returns and significant monthly cash flow. In many cases, lease agreements for commercial properties are signed for multiple years.

Commercial real estate investing offers investors an array of opportunities and advantages that other investment strategies do not. Once the benefits of commercial real estate investing are recognized, the next step is to dive in.

Important Factors to Consider When Searching for Commercial Properties

Sometimes, looking for a commercial property can be a big deal. It is one of the most important decisions made by business owners and operators since it can break or make a business. This is not something similar to buying a home.

Factors and list of considerations of commercial properties are way different from others. Most people do not pick commercial properties because it is next to their homes but most homeowners would pick a home property that is next to their workplaces.

The primary consideration for picking a commercial property should always be its location next to customers. Here are important factors to consider when looking for commercial properties:

1. Location
Commercial properties meant for business purposes should always be conveniently accessible to both the customers and employees as well. In cases where the business is new to the area, picking a commercial property in an abandoned path or area where people targeted to be hired can’t access easily won’t be the best idea.

For instance, in cases where one target to hire graduates, it should be a place they can easily access because they won’t be able to drive themselves there as they still can’t afford their own vehicles. This means that there is a need for situating the commercial property close to public transit for ideality.

Considering a commercial property situated in a more built-up area can also be a good idea though in most cases, they usually cost more. In the long-run, the price of the commercial property should always be worth it. Access to the needs, budget and expenses should be done in order to make realistic and smart choices in the business life.

2. Is the Property for Lease or Sale?
Most people who are new to doing businesses aren’t always sure if they can lease or buy a commercial property. The answer is here; someone new in doing business should rent a commercial property. In fact, they should go into short-term leasing.

Going into long-term leasing can tie one into a business in which they could have outgrown a couple of years ago. Until one gets a better handle on how a company can be run, a year-long lease is usually the best bet.

However, in cases where one has been into businesses for a while and knows the risks and flows associated with the type of business they want to be in, they can always buy a commercial property. In such cases, this is always cost-effective. This can work out especially if one is planning to stay in that particular area. Buying a commercial property also works best in urban areas since leasing prices in urban centers are usually high.

3. Work with Professionals
All professional services cost people a lot. When it comes to big investments like that involving commercial property, paying a pro is always the best thing to do to save yourself from money and hassle. In most cases, people who buy commercial properties don’t usually get stuck paying lease that might even end up hurting the business itself.

Buying Commercial Property Tips

Learning how to buy commercial properties has become the next logical step for many investors that have grown comfortable dealing in single-family homes. If for nothing else, commercial real estate represents the next challenge or exit strategy that can elevate your investing career to an entirely new level. While buying commercial real estate can certainly coincide with amazing benefits, it’s not without a few downfalls: risk, difficulty, and the sheer volume of capital required to deal in commercial real estate can all impede an investor’s progress.

It is worth saying, however, that buying commercial real estate is not impossible. Not unlike buying single-family homes, there’s a process; one that, if followed correctly, can result in amazing benefits. That said, you must know what you are doing if you hope to realize success in the commercial industry. Jumping in without a plan is the surest way to sabotage your own efforts and ruin everything you worked so hard to achieve.

If you want to successfully make the transition to commercial real estate familiarize yourself with the commercial real estate buying process. Here are a few buying commercial property tips to help:

Learn The Language: There can be a learning curve when making the transition from residential to commercial real estate, so you may need to go back to basics before you get started. Familiarize yourself with terms and concepts commonly used in commercial real estate, like capitalization rate and building classification. Reviewing the language will help make sure you are comfortable when talking to potential business partners, tenants and especially lenders.

Find A Market: Just like with any real estate investment, location is everything. It is not uncommon for commercial real estate investors to venture outside of their market area, or to invest in multiple markets. Analyze each market you may want to invest to find the right  area to invest. Don’t be afraid to choose high performing markets simply because they are outside of your local area or state.

Work With Your Mentor: A mentor is crucial for any real estate investor, but they can be especially helpful when it comes to more complex investing strategies like commercial properties. Attend real estate networking events in your area or ask your existing connections to meet someone with experience in commercial investing. As you build a relationship over time, their advice and insights could help as you build a portfolio.

Visit Properties: As you start identifying potential properties, make sure to visit each of them. This will give you a better idea of what to expect if you choose to move forward with the deal. Even if you do not plan on managing the property yourself, it is still a good idea to picture what the building will be like. Visiting properties can even help you narrow down your options if you have more than one investment you are trying to choose between.

Protect Your Assets: Before you move forward with your first commercial deal, make sure the rest of your assets are properly protected. Look into the way your business is currently organized and how a commercial property will fit into that. Research different types of liability insurance and business structures before taking on more complex properties.

Contact Details:
Austin Tenant Advisors
1300 Guadalupe St #250
Austin, TX 78701
(512) 861-0525
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