5 Reasons to Purchase Commercial Real Estate
Have you wondered why many Chinese investors have spent billions on commercial real estate purchases across the world? The Chinese purchase commercial real estate mainly because it is lucrative, which is why they have spent over $5.9 billion in the United States alone. If commercial real estate investments are done right owners stand to make a lot of money renting out properties. Not to mention the fact that the majority of commercial properties increase in value especially a trend associated with an economic uptick. However, there are other reasons to invest in commercial assets, as we’ll examine below.
Five Reasons To Get Into Commercial Real Estate Investments
Much Better Cash Flow
Commercial real estate investment purchases promise a higher yield than their residential counterparts on both an initial investment and per square foot basis. It is especially the case if you decide on purchasing and renting a multi-unit property. That way you have more tenants, which equal more income.
If in the right place commercial properties can help investors rake in anywhere from 6-12% annually on their purchase price. That’s much higher than most single-family rental homes where the annual return in between 1-4%.
Commercial Real Estate Investing Diversifies Risk
Now it stands to reason that if you invest in a multi-family commercial property, there is a much lower probability of losing your entire rental income any given month. Though you might lose a tenant or two at any given time but there are still others. So, your income generation machine continues to churn. Compare that to a single-family residence where the rent is dependent on one family, i.e. a sole tenant. If they happen to leave well, you’ll be without an income for some time.
Commercial Properties Limited Operating Hours
Another reason to purchase commercial real estate is that businesses have limited hours. They are only operational at certain times of the day, so it is less likely that you’ll be called at night to perhaps deal with a lost key or repair a busted water pipe. Though you can install an alarm monitoring service which will automatically notify the right people in the event that something goes wrong.
Business Tenants are Predictable
A tenant’s relation with their landlord in a commercial establishment is between two businesses and not two individuals. So, the interaction is more professional, and things tend to sail through more smoothly. It goes without saying that many landlords will desire the B2B relationship for the most part.
Locked-in Expenses with Appreciation
As the economy improves, landlords will enjoy better rental rates, so prices aren’t driven down. That’s perhaps another reason to purchase commercial real estate. When buying commercial property your monthly income is locked down, and so it makes paying off your loan much more predictable for the next decade or so. Not to mention the fact that the commercial property appreciates, especially if you’re in for the long-haul. In most cases, if you do the research, churn the numbers and understand the market commercial real estate offers the best long-term investment.
In short, commercial real estate investments can yield high returns over a long-term period. A success story of one example would be the story of Ray Kroc. He saw the potential of commercial real-estate investments during the infancy of the McDonald’s Corporation and today has enough commercially zoned franchise properties to rival that of the Catholic church. The Ray Kroc story is available on Netflix. Check it out!