Many studies are revealing that the United States has more than 5.7 million commercial buildings. Furthermore, each year is recording a rapid increase of buildings. The fact that commercial property is a lucrative investment has made many business people consider making investments. But, as an investor you should beware that challenges are prone to come. Below are some reason why commercial properties are suitable investments and the challenges you might face.
Whether or not challenges are involved, the profits received from a residential property can never be a match to those from a commercial property. Also, you increase your chances of earning ROI and build equity. Studies show that investors in retail properties are prone to receive a yearly profit of approximately 10%. It is vital to know that this is 5% more than what is received from the residential properties.
The fact that commercial properties require the triple net lease is highly advantageous. Here, the tenant is responsible for all the ongoing expenses such as insurance, taxes, and maintenance. Meaning that, an investor’s sole liability will be the mortgage. As a result, you still get your income without necessarily running the business physically.
In most cases, the quality of commercial properties remain intact. You can have the guarantee that your property will be clean since most business people understand the importance of cleanliness when it comes to attracting customers. As a result, your property will remain clean, maintained and functional. In case you have a new occupant, you will not have to worry about huge cleaning and maintenance costs.
According to commercial property brokers, the price of a property should relate to the much that the current owner gets. When it comes to the seller; good commercial property brokers should mention a price that ensures the current owner earns according to the area’s existing cap rate.
Here are chances you need to beware of before purchasing a commercial property. In most cases, commercial properties depend on the current economy. When there is an economic downturn; commercial properties are hugely affected than the residential properties. You need to know that people will always need a place to live, but, businesses may not survive throughout. Most small business owners can opt to work from home. Rather than waiting for depression, you should consider to prepare your property.
It is necessary to acknowledge that more modern features are a threat to older ones. If you are getting help from commercial property brokers, they will advise you to go for a modern building since it is easier to get tenants. They will also inform you of how expensive it is to remodel a commercial property. When the number of new properties increases, there is a high likelihood that you will lose your occupants. You should also know that it is challenging to get a commercial building fully occupied.