While some people consider investing in residential properties that could last for a lifetime, it is essential to take note of commercial properties as well.
If you’re unfamiliar with how to invest in commercial property, you’ve come to the right place. Commercial properties aren’t just money-generating possessions, there are factors you need to consider when owning one.
What are commercial properties?
Unlike residential properties that operate with occupational and non-business purposes, commercial properties are real estate properties that are intended for business. It can either be used as commercial establishments used in business operations or a larger residential property that houses tenants. Whichever purpose it will serve, it is a great source of both active and passive income. Investors can purchase a commercial property as it is, or invest in a commercial property investment company.
Commercial properties fall into different categories according to their purposes:
- For leisure: Restaurants, cafés, hotels, public houses, and sports establishments.
- For retail: Shopping malls, retail stores, and shops.
- For office and workplace: Service offices and office buildings.
- For healthcare: Hospitals, nursing homes, and medical facilities.
- For apartments: Multifamily housing buildings, boarding houses, and bed spaces.
How commercial property investment can help you achieve success
For newcomers in the business field, it might be quite a struggle to balance the pros and cons of investing in a commercial property that could potentially bring you financial success. It is normal to treat this matter sceptically, as purchasing this investment is a huge step. If there are different criteria to consider in renting a commercial space, you as an entrepreneur, should also be well-informed about the advantages of investing in a commercial property.
1. You can get higher income potential
Investing in a commercial property can be differentiated through two purposes an investor may have:
- The investor leases the property, while tenants pay for the rent when using the property for business and personal purposes.
- The value of the property relatively increases over time, gaining interest.
As your commercial property can be rented by different kinds of tenants with different purposes of renting them, you can gain a range of income depending on the purpose that they will fulfill. For example, business owners that will rent your property to build shopping centers can produce incredibly high rent income, as well as office buildings that cater to corporate individuals.
Depending on the purpose, size, and location of your commercial property, its potential to gain income is noticeably higher than that of residential properties, as there is an annual return of the purchase price of 8.6% over the last 20 years, according to the S&P 500 Index.
2. Offers various specializations
Successful commercial property investors are more likely focused on only one niche depending on the market trends and environment. Major specializations that mostly click in the market are retail and office and workplace. Brokers in different niches possess different attributes that make it helpful for them to gather sales.
In the industry, many people strive to unleash their fullest potential for more market advantage by being a jack-of-all-trades, yet it can put them at a big disadvantage. In commercial property investments, choosing a specific niche will help you differentiate yourself and set yourself aside from other competitors, giving you an essential influence and closer achievement to success. This speciality will define more elements of your investment, such as the properties you stand for, people that you’ll be interacting with, together with the overall environment, and the necessary abilities and expertise you should have once you enter that niche.
3. Wider network and relationships
By purchasing your own commercial property and leasing them to multiple business owners, you are opening yourself up to greater and wider opportunities to both be influenced by the market, as well as influence the market. The latter helps you in entering a wider network where more business owners interact.
For instance, the retail company renting your commercial property is also a part of the market industry. It is inevitable that they will interact with different companies in a day to help them expand their business. In this way, there are high possibilities that the businesses that they interact with will also be interested in working with you.
As commercial properties range from housing buildings to shopping malls, there is a wide range of possibilities and profits that you can earn. Thus, the success you will gain is significantly greater.
The success of a business will always depend on the owner’s determination and passion to give out valuable goods and services to the people. As you’re considering buying a commercial property for your own business, it is important to take note that you’ll have to take the small steps towards achievement, but don’t expect to obtain them immediately. These are just some of the ways a commercial property can help you achieve success. Despite the challenges and risks, a commercial property has a big value and is worth the investment to secure your future.