Investment

The Pros and Cons of Investing in Commercial Real Estate: A Business Owner’s Guide

Investing in commercial real estate can yield a lot of return on investment, but that’s not to say that it’s without its fair share of risk; attaining or selling your own commercial property can take as little as weeks to as long as a decade.

How can you determine whether or not buying a commercial property is a wise decision? By weighing the pros and cons of the investment–and we’ve got the guide to get you started.

Read on to learn exactly how investing in a commercial property can have an impact on your wallet and on your life:

Table of Contents

Investing in Commercial Real Estate: the Ups and the Downs

For starters, commercial properties are unique in that larger market trends don’t necessarily correlate to individual property. That means that you can win or lose big without necessarily seeing similar trends in the market.

However, with enough foresight, owning commercial property doesn’t have to be a gamble.

The Pros

Commercial property, such as co-working spaces or strip malls, offer owners plenty of opportunities to make a hefty ROI. Why? These types of properties can mostly maintain themselves if the appropriate business decides to move there.

That means owners will have to scrutinize applications and only rent to sturdy businesses with positive reputations. These professional establishments will aim to keep up their stores on their own to attract and retain customers.

Maintaining a commercial property will also usually allow owners a regular 9-5 schedule (so long as nothing drastic happens to the building after-hours).

Owners can benefit in creative ways by simply having the control over the look and the choice of which companies will be hosted.

Undoubtedly the biggest pro of all, commercial properties tend to offer a higher return than single-family residential properties.

The Cons

Budgeting to purchase a commercial property, you’ll have to face the biggest fact: to get more money, you’ll need to spend more money.

The price tag on a commercial property is enough to scare away many investors though it can gain them a huge profit with the proper tenants.

Because you’re buying more property at once, and because sellers know the earning potential, down payments can be steep.

Actually maintaining the property is another major topic of concern for investors: in order to meet safety standards and to repair any damage to the property, owners must be licensed to do so. Failing to be licensed has detrimental consequences.

The alternative here is to outsource help to a management team. This will help add security to your investment and help gain peace of mind, though it will cost you more each month. Protecting your investment will ultimately attract more tenants.

You should look for credible management teams and hold these companies to the same standards as renters. Having a retainer team of professionals such as roof repairers or electricians can cost you, so invest wisely (more info on roofing here).