Whether you’re completely new to Dunnellon real estate investing or have owned rental properties for a long time, you may be seriously reflecting on becoming a commercial property landlord. For a lot of investors, this is not a choice that should be taken half-heartedly. This is because of the fact 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, and apartment and mixed-use buildings. To efficiently manage these kinds of buildings, there are a lot of things you need to know. When deciding if investing in commercial properties is appropriate for you, it’s relevant to assess both the pros and cons of doing so. In the paragraphs that follow, we’ll get a clearer understanding of both, as well as look at tips on what it takes to become a really good commercial property landlord.
The Pros
When investing in commercial real estate, one of the obvious appeals for investors is the income potential. Granting that your initial investment in commercial property will be much higher than single-family residential rentals, in most circumstances, you can expect a higher annual return on your investment. A multifamily apartment building with numerous tenants, as an illustration, can likely lead to your rental income exceeding your costs enough to leave you a tidy net profit each month.
Numerous investors also want to invest in commercial rentals since it lets you work along with your tenants more professionally. If you own retail or office buildings, your tenants will be business owners, which will enable you to keep your relationships with your tenants polite and professional. To top it off, business owners are normally ardent in keeping their rented spaces in good order, precisely if they offer products or services to the general public. This can support you in easily maintaining your property’s condition over the long term.
The Cons
Together with the benefits of owning commercial rental properties, as a matter of fact, there are particular challenges too. We’ve already noted the larger initial investment you can consider raising to purchase a commercial property. But at the same time, there are other, typically larger, costs and risks that are involved also.
The greater number of people using a building, the more maintenance and repair it will need. Staying on top of property maintenance for one or more commercial buildings can be a really costly and time-consuming task, so it’s imperative to make sure that you have the budget and the dedication to achieve that.
Another risk in regard to commercial rental properties is the risk of injury. Like larger numbers of people will increase maintenance costs, it furthermore greatly increases the chance that someone will be hurt or cause intentional damage to the building and grounds. Not only will you need to have premium insurance to help protect you from such risks, but as a matter of fact, it may moreover be essential to litigate injury claims or other lawsuits more often. If you are greatly risk-averse, being a commercial property landlord may not be good for you.
Tips for a Commercial Property Landlord
If you’ve made up your mind to invest in commercial properties for your next business venture, it’s necessary to start up on the right foot. To find fulfillment as a commercial property landlord, here are a few tips to doing a fantastic job:
- Start with Residential Properties. If you are not acquainted with investing in rental real estate, it can be worthwhile to go start with single-family rental properties before eventually moving to commercial buildings. Taking care of single-family properties is somewhat slower-paced and will be less demanding for you in general.
- 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 a lot longer, but definitely you can furthermore guard the value of your property.
- Mitigate Risk. If you haven’t already, you should do what is necessary to bring your property up to code, mainly where your tenants’ health and safety is concerned. Think about adding an alarm system, sturdy locks, and even a fire sprinkler system, if necessary, to help you tend to risk.
- Learn to Negotiate. Commercial leases are, for sure, less predictable than those used for residential rental properties. However, just about everything can be negotiated. Not only will you have to involve an expert you can trust to help you draft your lease documents, but in fact, you can and should work with your tenants to accomplish an agreement that will be beneficial to everyone.
Finally, what it all comes down to, only you can decide whether investing in commercial rental properties is a good option for you. Quite a lot of commercial property landlords find the job complicated, with competing demands on their time. However, the profits can make all the arduous tasks worth it.
Are you eagerly looking to add a new investment property to your portfolio? Real Property Management Diversified is your solution. Our Dunnellon 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 352-854-2221 or contact us online.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
