Commercial real estate Investment is the natural progression from real estate investment. Property investors have a tendency to move into real estate – and for good reasons. If you have got $15 million worth of properties imagine. That will be a good deal of tenants and houses. On the other hand $15 million will purchase a few of properties which will be easy to handle with lesser overheads. Commercial properties include Offices, industrial sheds, free standing retail store, bulk retail, block of shops, health facilities, service stations, motels, hotels, back packers, health clubs, churches, funeral parlors, child care facilities, car yards, convenience stores, shopping malls, to mention only a few. Each sort of property investment has hazards, strengths, issues, rewards and its own peculiarities.
The return on investment in Commercial real estate is a lot higher than residential property. The income is net rather than gross because the tenant pays all of the outgoing expenses. The income is more secure due to the leases. It is typical to have returns of around internet for a property investment and anywhere from 7% to 9 yields for a property that is primes. The value of a commercial real the characteristic of the lease determines estate to a wonderful extent. Generally taking contractual rental and use of a capitalization rate determines the value. The value is dependent on the quality of duration and the renter of the lease. The value of a commercial if it becomes empty Property can fall substantially. I have seen commercial properties being sold at less than half of their value if they are difficult to lease.
Commercial property management is also much easier because tenants have a strong vested interest to keep the property to a high standard. Tenants derive their income. Keep impressing their customers and they need to keep the property. I have seen tenants spend Thousands and thousands of dollars to make improvements. The majority of these improvements remain with the property after the property has been abandoned by the tenant. Real estate law is much more Flexible towards rental contracts. You include and can word any clause that is agreeable to the parties. It is normal to charge penalty interest on the outside standing lock or lease the assumptions on continued default of lease. Definitely the biggest risk in Real estate investment is finding a new tenant. In commercial property the requirement of every tenant concerning size, location, usage and lease payment capacity is so different it is extremely tricky to get the ideal tenant for the correct property.