If there is one investment that has more profit than risk attached to its name, it is definitely the real estate market.
Yes, one needs initial capital to start investing in Stark properties. However, if you have gathered some capital and wish to make your very first real estate investment, you should consider commercial properties.
Why?
In this excerpt below, we will discuss some convincing reasons why you should buy commercial properties rather than residential ones.
Yes, the cost of such commercial properties might be a little higher than any other investment, but it will be worth it in the long run.
1. Easier Way To Diversify
Residential property has only one intention. You either rent it or sell it to families building a home for themselves. However, diversification is much smoother when it comes to commercial properties. The space can be utilized in a plethora of ways.
The return on investment has already become high, according to the expert predictions of Rising Realty Partners. A single property will have multifunctional properties. Office spaces, shops, cafes, restaurants, departmental stores, and even ATM stations. The list goes on, and you can already expect a return on investment.
2. Only High-End Clients
Both commercial and residential properties will involve negotiation from both ends. But, regarding commercial properties, the chance of high-end clients is high, especially if your property is in a good location.
If you want to enhance your commercial; estate investment value, try buying properties around martech or fintech hubs. This is where most companies are likely to come to invest as their primary headquarters.
You can either rent them your property or be an equity investor in their company upon lending them the property. This means their percentage of profit gives you a lifetime of earnings.
3. Cash Flow
Lifetime earning brings us to the next point. Commercial property will automatically fetch you more rent than any residential property. Whether you provide the company a land to build their property upon or rent then a built-in property, a monthly cash flow is guaranteed.
The best commercial investment is definitely offering the property for an ATM installation for daily cash flow. However, there are certain criteria you have to match for that installation, so do look into it.
4. More Loan Options
Not everyone starts with 100% capital for their real estate investment. Sometimes, they only have 40% for their down payment and loan the rest.
When you loan for a commercial property, your profile automatically becomes more eligible. Especially if you keep that property as a mortgage. Even loan providers know that commercial properties are for businesses with a steady profit flow. So they do not have to worry about a loan not being paid.
5. Leverage
This is something not every novice investor is aware of. But, a commercial investment will cost you less than a residential investment. When you buy a commercial, you are only paying for the space.
However, in terms of residential investment, you are also paying for the improved amenities it comes with (half of them you do not even want). Plus, if you sell them, the family will rejuvenate the place anyway.
This is why it is easier to leverage commercial properties than residential ones.
6. Tax Advantages
Deduction, depreciation, and low tax are all benefits you will enjoy if you invest in commercial properties. Plus, when you decide to sell this commercial property, your obligated tax would be much less than that of other properties.
This could also be an excellent selling point to attract commercial property buyers when you are ready to sell it for a profit.
7. More Control
Commercial properties, more often than not, are rented and not sold. Which means you, as an owner, will have more control.
Plus, compared to other investments like stocks, or bonds, the chances of losing all your assets are almost null. The worst-case scenario is you have to sell your property at a loss. You are liquefying your asset to get something out of it.
8. Increase In Value
With the current infrastructure only having growth in the graph, it is not an unworldly prediction that every area will be a commercial hub one day. If you have a good eye for commercial areas, you should be able to more than double the investment return within a decade.
Unlike any other investment, commercial properties are only likely to increase in value with time.
9. Long Leases
If you are investing in the property just for the purpose of leasing, remember residential leases are short. Thus, the cash flow is not that consistent. This is where the difference lies with commercial properties.
An average commercial property hosting a business will have its lease for a minimum of 3 years. The maximum is 5 years. No commercial property by rule is signed any less.
10. No Furnishing Or Extraneous Cost
In order to make a residential property worth a high sale you also have to invest upon beautifying the property. Focus on aesthetic and amenities to impress the family or renters.
But, commercial properties have an increased value through their location. Therefore, you do not have to worry about other improvement costs.
11. More Rents Equal To More Leases
Generally with a residential property you can divide the lease into two. However, you can easily rent the place to more than one renter when it comes to commercial properties.
Even if it is a three storeyed building, or a huge land, you can rent it to three different properties. Which means, lease divided into three parts, hence more than earnings.
Before You Invest!
Before investing in commercial properties, conducting thorough research and due diligence is crucial.
- Assess the market conditions, demand drivers, and potential risks. Evaluate the property’s location, condition, and income potential.
- Consider factors such as vacancy rates, rental rates, and property management requirements. Analyze the financials, including cash flow projections, operating expenses, and financing options.
- Seek professional advice from real estate agents, property appraisers, and financial advisors. Understand local regulations, zoning laws, and tax implications.
- Create a comprehensive investment strategy, set realistic goals, and have a contingency plan.
Only proceed with investments that align with your risk tolerance and long-term investment objectives.