People often look to property investment as a source of income, and making an informed decision about where and how to invest requires guidance. Residential real estate is popular for investors, but investing in commercial real estate should also be considered. There are several types of commercial properties available, including office buildings. While there can be some fluctuation in the market, commercial real estate investment can still be a sound option.
Advantages of Commercial Property Investment
One reason we advise investors to look into commercial real estate is that the tenants have an incentive to maintain the property and keep it aesthetically appealing. Offices need to maintain a professional appearance to draw and retain customers, so there is less concern that a renter will damage or deface the property.
Another important advantage is the increased income potential. While single-family homes typically generate a 1 percent to 4 percent annual return, commercial properties generate 6 to 12 percent yearly return of the purchase price. Furthermore, depending on the terms of the lease, the tenant may be responsible for property taxes and insurance. Cost sharing by the tenant means fewer expenditures for the investor and a higher return on the investment.
Commercial real estate investors may also enjoy fewer demands on their time than do residential property investors. Offices tend to have limited and set business hours, meaning that maintenance calls and other responsibilities are restricted to those times.
Drawbacks of Commercial Property Investment
Commercial office properties usually require significant startup costs, and repair costs can be higher than those for residential properties. It is likely that repairs may have to be outsourced to a contractor, while landlords often handle residential repairs. As you consider your investment options, these expenses should be weighed against the expected annual return. Consulting commercial real estate professionals like those at Royal Commercial Real Estate can provide the guidance and clarity you’re looking for as you weigh your options.
Commercial real estate management can be complex due to the multiple companies leasing in the same office building. This can raise contractual issues and requires effective interaction with a larger number of players. Hiring a professional management company can simplify and reduce these interactions for you.
There are also liabilities involved with customers and other individuals visiting the property throughout the day. Parking lot accidents and personal injury lawsuits are inherent liabilities of commercial property management. Proper insurance can provide protection against these liabilities.
There is also the issue of property security, particularly after hours. Of course, security issues vary depending on location. It may be necessary to contract with an outside security provider.
Making a Decision
It is best to consult an experienced commercial real estate broker before making an investment decision. Professional guidance will make the process of commercial office investment as smooth and profitable as possible.