Pros and Cons of Investing in Commercial Property

Every person will have the same opinion that any property whether it is commercial or residential is a good investment. But if choosing between these two, commercial property gives better financial returns than the residential property, even though it includes some risks points too. So in this article let’s study all the pros and cons of Investing in Commercial Property.

Commercial Property

The concept of “commercial property” includes:

  1. Industrial buildings
  2. Office buildings
  3. Apartment buildings
  4. Warehouses
  5. Retail buildings, etc

Pros of Investing in Commercial Property :

  1. It will give you the chance to earn the solid income, as the annual return of commercial property is up to 6% to 12%( depending on the goods location). But in residential property income is only up to 1% to  4% .
  2. The interaction is well-mannered and professional as the owners of such property are usually educated, high class people and not an individual. So, here business-to-business interaction is fully professional and easier.
  3. The tenants are concerned in maintaining their building outlook, so as not to affect their business. The same is with property owners, who understand the necessity to maintain and improve their property.
  4. Maintenance is systematic and easy here. Commercial properties are set with specialalarm monitoring
  5. The price is considered due to the returns statement of the current owner. With the help of a good broker, you can estimate good selling price.
  6. There are several variations in leasing the property. One of them is – the owner does not pay any operating cost on the property, only the finance. All other expenses are handled by the lessee. This type of leases is not applied to residential property.
  7. Commercial property has Flexible lease terms. But in the residential property lease terms are more( state laws,security deposit limits and termination rules, etc)

Cons of Investing in Commercial Property:

  1.  There are more things to manage for the owners of commercial buildings with 5 or more tenants than for the owners of residential property. You are not allowed to be an truant owner and get the maximum return from your investment. You will have to deal with multiple leases, annual Common area maintenance charges settlements, some repairs and concerns as to the public safety.
  2. You should have a license if you are going to deal with maintenance issues yourself. But it is better to apply for professional help in this situation and hire somebody. Do not forget that these expenses should be included into the cost. You will pay 5-10% of your rent to property management companies, including lease administration.
  3. Be ready for larger initial expenses.  After buying a commercial property, you may expect the necessity to spend more on its maintenance and new appliances. The larger is the property, the higher are the costs.  Along with this risks rate is high. Commercial property is used by the larger amount of users, who can get hurt or damage the property.

Anjali Radhakrishna

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