Whether you’re a neophyte with regards to Ballard real estate investing or have owned rental properties for a period of time, you may be earnestly considering becoming a commercial property landlord. For the majority of investors, this is not a plan of action that should be taken on nonchalantly. This is related to the fact owning and managing residential rentals is very different from owning and managing commercial properties.
A commercial property, by definition, could comprise retail, industrial, office buildings, apartment and mixed-use buildings. To excellently manage these kinds of buildings, there are some things you must know. Just prior to deciding if investing in commercial properties is profitable for you, it’s imperative to take into consideration both the pros and cons of doing so. From here onwards, we’ll look a little closer at both, and also look at various tips on what it takes to become a really good commercial property landlord.
When investing in commercial real estate, one of the solid reasons that draw in investors is the income potential. Despite the fact that your initial investment in commercial property will be much higher than single-family residential rentals, in many situations, you can actually expect a higher annual return on your investment likewise. A multi-family apartment building with multiple tenants, for instance, can most likely lead to your rental income exceeding your costs enough to get you a tidy net profit each month.
Quite a lot of investors also desire to invest in commercial rentals because of the fact that it enables you to work with your tenants more professionally. If you own retail or office buildings, your tenants will be business owners, which will encourage you to keep your relationships with your tenants polite and professional. More than that, business owners are typically serious about keeping their rented spaces in good running order, especially if they offer products or services to the general public. This can help you to more easily maintain your property’s condition over the long term.
Along with the benefits of owning commercial rental properties, there are, admittedly, several challenges as well. We’ve already stated the larger initial investment you need to actually prepare to purchase a commercial property. But, as a matter of fact, there are other, generally larger, costs and risks that are involved additionally.
The more people using a building, the more maintenance and repair it will actually need. Staying on top of property maintenance for one or more commercial buildings can be a highly expensive and time-consuming task, so it’s crucial to make certain that you have the budget and the dedication in this regard.
Another risk with regard to commercial rental properties is the risk of injury. Much like larger numbers of people will increase maintenance costs, it moreover magnifies the chance that someone will be hurt or cause intentional damage to the building and grounds. Not only will you need to obtain really good quality insurance to help protect you from such risks, but in fact, it may as well be important to litigate injury claims or other lawsuits more often. If you are deeply risk-averse, being a commercial property landlord may not be great for you.
Tips for a Commercial Property Landlord
If you do decide to invest in commercial properties for your next business venture, it’s critical to start on the right foot. To find good results as a commercial property landlord, here are a few tips to doing excellent work:
- Start with Residential Properties. If you are unfamiliar with investing in rental real estate, it can be suitable for you to start off with single-family rental properties before moving to commercial buildings. Managing single-family properties is a little slower-paced and should be less demanding for you.
- 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 a very long time, but you can moreover secure and protect the value of your property.
- Mitigate Risk. If you haven’t already, you should undertake measures to bring your property up to code, in particular where your tenants’ health and safety is concerned. Take into consideration attaching an alarm system, sturdy locks, and even a fire sprinkler system, if right for your situation, to help you take care of the risk.
- Learn to Negotiate. Commercial leases are definitely less predictable than those used for residential rental properties. Practically everything can be negotiated. Not only will you need the presence of an expert you can trust to help you draft your lease documents, but more importantly, you can and should work with your tenants to formulate an agreement that will be to the advantage of everyone.
After all is said and done, only you can decide whether investing in commercial rental properties is a good call for you. Several commercial property landlords find the job stressful, with competing demands on their time. Although take note, the returns can make the struggle worth it.
Are you earnestly looking to add a new investment property to your portfolio? Real Property Management Uintah is your solution. Our Ballard 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 801-889-1517 or contact us online.
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