Four (4) Points Why You Should Invest in Commercial Real Estate Over Residential
There are a lot of investment opportunities to choose from in these times. From stocks, bonds, trust funds, commodities and gold, cryptocurrency, to real estate. It all depends on your risk tolerance, preferences, and long-term goals.
If you are an investor, first-time or not, who prefers to invest in real estate among other investment opportunities then this article will be of interest to you. As you may know, real estate is classified into two (2) categories – Commercial Real Estate, and Residential Real Estate. Read through this article to know the four (4) reasons why you should invest in commercial real estate (CRE) over residential.
Higher Income Potential
The income you can generate in a commercial property is much greater than their residential counterparts. Generally, commercial tenants cover many of the costs for the upkeep of the property. They pay CAM (Common Area Maintenance) charges to maintain the building, insurance, administrative fees, etc. of the commercial property they are leasing. Because this pass-thru cost is covered by the tenant, landlords do not have to worry about these expenses on the back end. On residential real estate, these expenses are not usually covered by the tenants; and if these charges are indicated in the lease contract, most of them are being negotiated.
This simply means that investing in commercial properties shows a greater value of income returns when compared to residential properties. Not only do the maintenance charges, administrative fees, and other expected fees being covered by the tenants making commercial real estate a reliable source of income over residential, but also commercial tenants tend to sign on for longer leases to avoid the hassle of changing their business location. This gives commercial landlords a sense of security that their properties will be occupied for longer periods of time. So if you are an investor, consider this – instead of making a few hundred dollars on a rental home every month, you could make thousands of dollars or even more if you choose the right commercial properties to invest in.
Quality Tenants
Commercial properties usually have stronger tenants than residential ones. If you are a residential property investor or a residential landlord, you will encounter a lot of calls from tenants requesting some issues or problems be fixed with their rental homes. Although you are responsible to cater their needs and address their issues, many of them end up calling in the middle of the night and on weekends causing a higher level of inconvenience.
These scenarios are rare and do not usually happen in commercial properties. Tenants leasing in commercial spaces tend to be much more professional. If they happen to encounter some issues, they have their own maintenance team to take care of it. Also, commercial tenants usually work normal business hours, so any calls you get from them will be at a normal time of the day. Therefore, investing in commercial real estate gives you better and quality tenants, and it also saves you from receiving calls in the middle of the night to address an issue or help a tenant get into their house.
Less Competition
The competition in commercial real estate is lesser compared to residential. Residential properties are very common and widespread which makes any commercial property appreciate differently due to the fact that a lot of investors often overlook the value and potential of CRE. Since financing is more difficult in CRE, available buyers will be lesser in comparison to residential real estate market. Hence, those who qualify are able to look at more options with less competition.
With that being said, choosing to invest in CRE not only gives you higher returns but also more income opportunities and profit potentials on your side!
Property Value Appreciation
A good investor carefully chooses what, where, and when to make an investment. Investing in a commercial building is a better and secure option when compared to a residential property. Why? Because when you invest in a commercial real estate, it appreciates quicker than that of residential.
One of the most significant distinctions between residential and commercial real estate is how property values are calculated. While comparable properties have a big influence on residential real estate, revenue has a big impact on commercial real estate. Moreover, commercial real estate properties are less susceptible to fluctuation making them a safer and stable investment.
Even after outlining all the information above, buying and selling CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at https://linktr.ee/PhillTomlinson. #LeveragedCRE