Share on facebook Facebook Share on google Google+ Share on twitter Twitter Share on linkedin LinkedIn

Considering investing in commercial real estate? Understand the pros and the cons

Spread the love

Commercial real estateAre you thinking about placing your money into a long-term investment plan? Any real estate investment — commercial or residential — can be an excellent opportunity for you. Commercial property usually offers more financial incentive than residential properties, such as leasing an apartment or single-occupancy homes, but the risks can be greater. Understanding the pros and risks of investing in a commercial building is central to making the right investment decision.

What is a “Commercial real estate?”

Commercial real estate may refer to retail buildings, office building, warehouses, industrial buildings, or “mixed use” buildings where the property hosts more that one of the categories mentioned above. This article looks at some of the  opportunities and risks of this kind of investment.

The pros

There are many benefits of commercial property investments; for starters, they are commonly valued based on their usable square footage, whereas this isn’t the case for residential real estate. With commercial real estate, the cash flow is often greater, resulting in a higher return – especially for properties with many tenancies where the risk becomes diversified.

Commercial properties have longer leases than residential properties making them a more sustainable long-term investment for you consider.

Due to increased banks’ lending capabilities and easing in their standards, there is substantial capital availability. With the rising acceptance of alternative funding like crowdsourcing, as well as investment firms like Sentinel Property Group, you will have a diverse source of capital.

The cons

Although there are many positive reasons to invest in commercial property over residential, there are also negative issues to ponder.

Higher initial investment. Buying a commercial property typically involves more capital up front compared to acquiring a residential property in the same area. Once you’ve purchased a commercial property, you can anticipate large capital expenditures to follow. Repair bills can run into thousands of dollars. With more tenants, there are more facilities to maintain and hence more costs.

More risks. Commercial buildings have more residents and visitors. Translating to more people on the property daily who can get hurt or do something to damage your property.

Cash flow is often larger with commercial property. The returns are a lot higher per square foot on an initial investment basis than it is on residential property. With its firm foundations, diverse funding sources and a global reputation investment in commercial real estate remains an attractive venture for you to consider. Sources

Scroll to Top