Whether you’re clueless about San Diego real estate investing or have owned rental properties for quite some time, you may be evaluating whether to become a commercial property landlord. For some investors, this is not a decision that should be brought about thoughtlessly. This is due to the fact that owning and managing residential rentals is very different from owning and managing commercial properties.
A commercial property, by definition, could mean retail, industrial, office buildings, and apartment and mixed-use buildings. To competently manage these types of buildings, there are particular things you ought to know. Just before deciding if investing in commercial properties is suitable for you, it’s significant to look into both the pros and cons of doing so. In what follows, we’ll look closely at both, and also present certain tips on what it takes to truly become a good commercial property landlord.
The Pros
When investing in commercial real estate, one of the greatest attractions for investors is the income potential. While it’s true that your initial investment in commercial property will be much higher than single-family residential rentals, in the majority of cases, you can also rightly expect a higher annual return on your investment as well. A multifamily apartment building with various tenants, as an illustration, can perhaps give rise to your rental income exceeding your costs enough to give you a tidy net profit each month.
Countless investors also like to invest in commercial rentals on the account that it actually gives you a chance to work with your tenants more professionally. If you own retail or office buildings, your tenants will be business owners, which will help you keep your relationships with your tenants polite and professional. Furthermore, business owners are usually determined to keep their rented spaces in a good state, specifically if they offer products or services to the general public. This can definitely help you more easily maintain your property’s condition over the long term.
The Cons
Besides the benefits of owning commercial rental properties, on the other hand, there are a small number of drawbacks. We’ve already mentioned the larger initial investment you are required to prepare to purchase a commercial property. But more than that, there are other usually larger costs and risks that are involved at the same time.
The more people are taking advantage of a building, the more maintenance and repair it will entail. Staying on top of property maintenance for one or more commercial buildings can be a very expensive and time-consuming task, so it’s essential to ensure that you have the budget and the dedication to achieve this.
Another risk correlated to commercial rental properties is the risk of injury. Same as when larger numbers of people will increase maintenance costs, it similarly heightens the chance that someone will be hurt or cause intentional damage to the building and grounds. Not only will you really need the best quality insurance to help protect you from such risks, but at the same time, it may likewise be crucial to litigate injury claims or other lawsuits more often. If you are greatly risk-averse, being a commercial property landlord may not be appropriate for you.
Tips for a Commercial Property Landlord
If you choose to invest in commercial properties for your next business venture, it’s vital to get moving on the right foot. To find successful accomplishment as a commercial property landlord, here are a few tips to doing good work:
- Start with Residential Properties. If you are without knowledge and experience about investing in rental real estate, it can be practical to initiate this endeavor with single-family rental properties just before moving to commercial buildings. Maintaining single-family properties is quite a bit slower-paced and might be less demanding overall 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 longer time, but definitely, you can similarly preserve the value of your property.
- Mitigate Risk. If you haven’t already, you should take precautions to bring your property up to code, definitely where your tenants’ health and safety is concerned. Look into integrating an alarm system, sturdy locks, and even a fire sprinkler system, if fitting, to help you deal with risk.
- Learn to Negotiate. Commercial leases usually do not come as expected as those used for residential rental properties. Almost everything can be negotiated. Not only will you want an expert you can trust to help you draft your lease documents, but more importantly, you can and should work with your tenants to get to an agreement that will be helpful for everyone.
In the final analysis, only you can decide whether investing in commercial rental properties is the right fit for you. Plenty of commercial property landlords find the job arduous, with competing demands on their time. But on the other hand, the advantages and payoffs can make all the effort worth it.
Are you eager and looking to add a new investment property to your portfolio? Real Property Management Realevate Specialists is your solution. Our San Diego 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 858-997-2100 or 951-461-0100 or contact us online.
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