Commercial Real Estate Investing 101: Benefits of Buying Commercial Real Estate
There are some very good reasons to consider investing in commercial real estate, depending on your investment goals. Some commercial real estate investors choose commercial real estate in order to grow future wealth and security, some prefer to invest their dollars in a tangible asset instead of the stock market, and others enjoy the tax benefits and investment portfolio diversification. Whatever your investment goals, commercial real estate has the potential to be a great investment. In fact, potential investors should know that there are many benefits of buying commercial real estate.
If you are deciding where to invest your money, it’s important to know the benefits of each kind of investment. In this article we will share the top reasons to choose commercial real estate over residential real estate. If this article sparks your interest, Windermere Commercial is here to answer your questions.
Benefits of Buying Commercial Real Estate
Let’s take a look at the top seven benefits of buying commercial real estate.
- Higher potential income
Commercial real estate properties typically have a better return on investment with an average return of six to twelve percent, compared to single-family properties at one and four percent. In addition, income from commercial real estate tends to be more consistent with lower turnover and longer leases than residential properties.
- Consistent cash flow
Cash is king, as they say, and commercial real estate provides a relatively consistent cash flow because of the longer lease periods that come with commercial properties. The other two reasons that commercial real estate offers a more consistent cash flow than other types of real estate investments are: 1. They often have more units than residential properties and 2. Many commercial tenants pay the building’s real estate taxes, property insurance, and maintenance costs under what’s called a triple net lease.
- The option to invest in owner-occupied commercial real estate
Owner-occupied commercial real estate (OOCRE) is when investors purchase commercial real estate to operate their own business out of. This strategy can be applied to any of the five types of commercial real estate. OOCRE applies when the building owner is the sole tenant or the anchor tenant in a building. This can be a great option over leasing because, as the investor, you will reap the rewards of building appreciation. In addition, once your loan is paid off (or if you pay cash for the property), you will save yourself the cost of a monthly lease.
- Long leases
One of the reasons that investors are drawn to commercial real estate are the long leases that come with commercial properties. Commercial property leases are typically three to five years compared to one year for residential real estate leases. Replacing tenants costs money so having a long lease in place not only ensures a steady income flow, it saves the costs associated with replacing tenants.
- Less competition
Sometimes it seems like everyone owns a residential rental property. Investors who are getting into residential real estate are inevitably entering a crowded market. One of the advantages of commercial real estate investing is that there are typically fewer investors in a given market – which means less competition for the best buildings. This could be due to many reasons, including a perception that commercial real estate investing is harder to get into. Either way, it can leave an opening for qualified, interested investors.
Note: at Windermere Commercial, we help connect commercial real estate investors to great commercial properties in Whatcom County. If you have any questions about whether commercial real estate investing is right for you; we are a great resource.
- Form business relationships
When you own commercial real estate, your clients are other business owners. This creates opportunities to form professional business relationships with your tenants that residential properties don’t usually provide. The more business relationships are made, the more your network expands and, along with it, a chance to get involved in the local business community you are investing in. These types of relationships build trust and positive reviews, leading to more potential tenants.
- Reasonable operating hours
Commercial investors who manage their owner properties benefit from more work/life balance when it comes to repairs. When a residential tenant has a broken appliance or HVAC system, they are likely to call or make an online request as soon as it happens – at any time of day or night – with the expectation that it will be fixed in the evening or on a weekend, if that is when the issue comes up. Business tenants have working hours and are therefore much more likely to call within those hours. They may also be more understanding about issues being handled during regular business hours.
Commercial real estate investing comes with many great and unique potential benefits for investors. If you’re ready to start looking into commercial real estate investing, contact a real estate company who can offer you the support you need.
Turn to Windermere for real estate done exuberantly right.
For 50 years, Windermere has used our extensive knowledge of local markets to offer a full range of services that match your commercial real estate needs. Whether you’re a business looking to buy or lease space, or an investor interested in private capital or institutional properties, you’ll benefit from our experience in all phases of commercial real estate, including leasing, business development, brokerage, property management, and consulting.
You can depend on our powerful network
Windermere Commercial has established connections with highly reputable brokers throughout the nation. We also have the benefit of being affiliated with Windermere Real Estate, so you aren’t simply hiring a broker; you’re hiring an entire company with an extensive team of dedicated professionals whose highest priority is to help you reach your commercial real estate goals.
Are you interested in owning commercial real estate property? Connect with our people today.