What You Should Know About Commercial Investment Properties
Unlike residential property, which has been discussed in length in many forums, commercial properties are a mystery to many people. Many people have also had the chance to rent residential property at a certain point in their lives so they know a bit about them. If you opt for commercial investment properties, you should learn a few things in order to reap full benefits.
Although the default option for most people is residential units, it is good to consider commercial ones because they offer more options. For example, one can choose from retail, industrial establishments or even offices. This therefore means you should not feel tied down to a specific area if it does not present sufficient benefits.
The risk threshold in commercial property is much higher than in residential ones because of the likelihood of extended vacancy periods. However, the higher risk also means the rate of return is much higher. For example, if residential property gives you a five percent return, you can expect around eight percent from similar commercial investment. This can lead to quicker recovery of the money one spends.
When investing in any property, you have to give attention to the kind of tenant you are getting. Luckily, for business units, you are likely to get a high quality client especially if it is a large unit such as a warehouse or big office complex. The duration the unit is leased is also likely to be longer than that of a residential unit, which is around six to twelve months.
For this kind of property, the tenant will pay for most of the outgoing costs. This means expenses like repairs, maintenance, council rates and insurance. This will lift a big burden from your chest because a big chunk of the money you collect will be saved. This is not the case with residential property because you have to pay for many things diminishing your profits. The only thing you have to do is make sure the terms are quoted in the lease document.
Even though there are many benefits of making this kind of investment, you should expect a few challenges too. For example, you will encounter a higher entry cost compared to when you choose residential units. This will be the case especially when you want to buy property from an industrial area or central business district. The only way out is to choose smaller strata title property.
You will incur higher maintenance costs for a commercial unit whenever you have to do it. This is because it involves more than just repainting walls or changing floor covers. For instance, you might need to change the air conditioning system or do upgrades to meet health and safety concerns. This is vital because your tenants might not be given operating licenses without the renovations.
With these tips in mind when thinking of investing in commercial properties, it will easy to get good results. This will ensure that one gets good returns from the investment made. One will also avoid some of the problems such as long vacancy periods or very high costs of the property by choosing affordable areas.
Although the default option for most people is residential units, it is good to consider commercial ones because they offer more options. For example, one can choose from retail, industrial establishments or even offices. This therefore means you should not feel tied down to a specific area if it does not present sufficient benefits.
The risk threshold in commercial property is much higher than in residential ones because of the likelihood of extended vacancy periods. However, the higher risk also means the rate of return is much higher. For example, if residential property gives you a five percent return, you can expect around eight percent from similar commercial investment. This can lead to quicker recovery of the money one spends.
When investing in any property, you have to give attention to the kind of tenant you are getting. Luckily, for business units, you are likely to get a high quality client especially if it is a large unit such as a warehouse or big office complex. The duration the unit is leased is also likely to be longer than that of a residential unit, which is around six to twelve months.
For this kind of property, the tenant will pay for most of the outgoing costs. This means expenses like repairs, maintenance, council rates and insurance. This will lift a big burden from your chest because a big chunk of the money you collect will be saved. This is not the case with residential property because you have to pay for many things diminishing your profits. The only thing you have to do is make sure the terms are quoted in the lease document.
Even though there are many benefits of making this kind of investment, you should expect a few challenges too. For example, you will encounter a higher entry cost compared to when you choose residential units. This will be the case especially when you want to buy property from an industrial area or central business district. The only way out is to choose smaller strata title property.
You will incur higher maintenance costs for a commercial unit whenever you have to do it. This is because it involves more than just repainting walls or changing floor covers. For instance, you might need to change the air conditioning system or do upgrades to meet health and safety concerns. This is vital because your tenants might not be given operating licenses without the renovations.
With these tips in mind when thinking of investing in commercial properties, it will easy to get good results. This will ensure that one gets good returns from the investment made. One will also avoid some of the problems such as long vacancy periods or very high costs of the property by choosing affordable areas.
About the Author:
You can visit www.pages777star.com for more helpful information about Helpful Tips Before Choosing Commercial Investment Properties.
Comments
Post a Comment