Whether you’re totally new to West Covina real estate investing or have owned rental properties for a long time, you may be contemplating becoming a commercial property landlord. For plenty of investors, this is not a particular decision that should be executed casually. The reason is that owning and managing residential rentals is very different from owning and managing commercial properties.
By its meaning, a commercial property could include retail, industrial, office buildings, apartment and mixed-use buildings. To proficiently manage these different types of buildings, there are quite a few important things you have to know. Before finally deciding if investing in commercial properties is beneficial for you, it’s necessary to weigh both the pros and cons of doing so. Henceforth, we’ll look attentively at both, even discuss a few tips on what it takes to turn into a good commercial property landlord.
The Pros
When investing in commercial real estate, one of the obvious attractions for investors is the income potential. Even supposing your initial investment in commercial property will be much higher than single-family residential rentals, in nearly all cases, you can expect a considerably higher annual return on your investment. A multifamily apartment building with lots of tenants, by way of illustration, can likely result in your rental income exceeding your costs enough to get back a tidy net profit each month.
Plenty of investors also like to invest in commercial rentals because of the fact that it helps you to work with your tenants more professionally and effectively. If you own retail or office buildings, your tenants will be business owners, which will help you to keep your relationships with your tenants polite and professional. On top of that, business owners are generally committed to keeping their rented spaces in decent shape, especially if they offer products or services to the general public. This can aid you to more effortlessly maintain your property’s condition over the long term.
The Cons
Besides the clear benefits of owning commercial rental properties, on the flip side, there are certain challenges as well. We’ve already indicated the larger initial investment you can expect to come up with to purchase a commercial property. But in fact, there are other, generally larger, costs and risks that are involved.
The more people working in a building, the more maintenance and repair it will demand. Staying on top of property maintenance for one or more commercial buildings can be quite an expensive and time-consuming task, so it’s critical to ensure that you have the budget and the dedication to achieve this objective.
Another risk corresponding to commercial rental properties is the risk of injury. In the same vein that larger numbers of people will increase maintenance costs, it even escalates the chance that someone will be hurt or cause intentional damage to the building and grounds. Not only will you have to have really good quality insurance to help protect you from such risks, but certainly, it may additionally be relevant to litigate injury claims or other lawsuits more often. If you are firmly risk-averse, being a commercial property landlord may not be excellent for you.
Tips for a Commercial Property Landlord
If you prefer to invest in commercial properties for your next business venture, it’s imperative to get started on the right foot. To find positive outcomes as a commercial property landlord, here are a few tips to doing an amazing job:
- Start with Residential Properties. If you are clueless about investing in rental real estate, it can be useful and safer to make your start with single-family rental properties before moving to commercial buildings. Obtaining and managing single-family properties is a bit more slower-paced and can thus be less demanding.
- Be Proactive About Maintenance. As the saying goes, an ounce of prevention is worth a pound of cure. By staying on top of maintenance and repairs, not only can you keep your tenants in place for hopefully a bit longer, but definitely you can even protect the value of your property.
- Mitigate Risk. If you haven’t already, you should make arrangements to bring your property up to code, specifically where your tenants’ health and safety is concerned. Think about having an alarm system, sturdy locks, and even a fire sprinkler system, if appropriate, to help you cope with risk.
- Learn to Negotiate. Commercial leases are less predictable than those used for residential rental properties. Most everything can be negotiated. Not only will you need an expert you can trust to help you draft your lease documents, but you can and should work with your tenants to arrive at an agreement that will be good for everyone.
Lastly, only you can decide whether investing in commercial rental properties is a great fit for you. Some commercial property landlords find the job toilsome, with competing demands on their time. But certainly, the returns can make all the tough work worth it.
Are you excitedly looking to add a new investment property to your portfolio? Real Property Management Fairmate is your solution. Our West Covina property managers work with investors like you to help you find off-market deals, efficiently manage your property, and much more! You can call us at 626-691-9749 or contact us online.
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