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by Joel Teo
Joel Teo
writes on several topics on making Money, Investment Both online and
offline. ...
Platinum Quality Author
If you ever have been a landlord for residential property, I am sure
that you get complaints from tenants about leaking roofs in the
middle of the night. But what keeps most people back from investing
in commercial real estate is the fear of the unknown since not many
of us are born commercial landlords. However we can learn from
Donald Trump who spent his energy developing large office complexes
and that’s where he made his money. This article will highlight
three reasons why commercial property real estate investment is
better than private real estate investment.
Reason #1: Rental Yields may be better for commercial properties For
commercial property like shop space, the rental yield that you can
command depends directly on the human traffic in the area. Thus if
you invested money in such a property investment, the monthly cash
flow would be more than an equivalent costing residential property
investment in the same area.
In addition, most business owners when they come to view your
property have already identified your street as a good one for their
business in terms of human traffic and usually want to start renting
from you, thus you have the upper hand in negotiations. Contrast
this to most residential tenants who have a huge variety of
properties to choose in your vicinity and if they do not like your
property or your rental they can just as easily go to another
property.
Reason #2: Improvements on the property Business tenants generally
treat properties different from residential tenants. A business
owner who is renting property would generally fix small defects in
the property so that he can carry on business and would not bother
the landlord about such small problems. But additionally, most small
business owners would generally carry out small improvements in the
property that could boost the property value of your commercial
property.
An example of this could be the installation of a PABX System and
wiring up the whole office for a local area network. This could save
your new tenant a lot of time and could be used to give additional
value to the terms of the rental that you are providing.
Another example I heard recently involves office partitions. Law
firms and accountants generally have the same set up in their
offices and when law firms move, they generally would have to spend
money renovating so if you have existing partitions in your
commercial property, you might be able to get a whole professional
firm over to rent your property. Note in contrast, in most
residential property, tenants tend to love to puncture holes in
walls without permission, repaint certain rooms and at the end of
the lease and as a result most landlords have to do lots of repairs
just to return the property into its original condition.
Reason#3: Rental Collection
Typically there are some tenants that are not very prompt with their
rental payments and therefore the ability to choose tenants who
would pay would save you lots of money and make you even more in the
longer term. Imagine having to loose a few months of rental payment
and spend money on lawyers to evict the defaulting tenant from your
property.
If you have a commercial property, you can choose a tenant that has
lots of goodwill established in your premises. This would mean that
the tenant has a lot vested in your property and would therefore pay
his rent on time to stay out of rental disputes. Contrast this with
a residential property where the tenant can run away without paying
your monthly rental and has nothing very much to loose. Collecting
rental from residential tenants seems to be more difficult as well
for some strange reason.
In conclusion, this article has highlighted three reasons why
commercial property real estate investment may be better than
private real estate investment. That said, making money with real
estate is like value investing in stocks, the profit is made in the
buying. The time spent looking for a good property will reap its
rewards later in the form of good rental yield and capital
appreciation over time. Take massive action today and look for the
real estate investment property that you think meets your real
estate investment needs.
Joel Teo takes a keen interest in real estate investment as part of
a larger investment portfolio. For more tips on real estate
investing check out our real estate investment success series at our
real estate investing resource.
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