Unique benefits of owning commercial real estate

Unique benefits of owning commercial real estate

For the longest time, commercial real estate (or CRE) investing has been accessible only to more seasoned investors – those who have larger portfolios. Beginner investors, though, would find this particular market difficult to crack. But that was before. Today, thanks to the internet and online marketplaces, anyone can be an investor in real estate, even in commercial real estate. In this article, we are going to learn what CRE investment means and the unique benefits of owning commercial real estate. Let’s get started.

What is commercial real estate?

First and foremost, what precisely is commercial real estate? It is, at its most basic level, any property that is intended to generate revenue. It can comprise everything from retail stores to office buildings to industrial warehouses to restaurants, as well as more specialised properties such as storage spaces, hotels, casinos, and even healthcare facilities.

Why invest in commercial real estate?

Whether you’re coming from a long career in residential property or you’ve never invested in real estate at all, CRE can be a smart place to put your money. But why commercial real estate? Here are some reasons you might want to consider it for your real estate portfolio.

Unique benefits of owning commercial real estate

1. High income potential

The biggest reason to invest in commercial real estate is simply its potential. Commercial buildings come with higher rents and price tags, and thus higher potential for returns, too. Instead of making a few hundred dollars on a rental home every month, you could make thousands, tens of thousands, or even more if you choose the right properties. These increased margins could even help you grow your portfolio faster.

2. Less turnover

Unlike residential real estate, commercial real estate doesn’t typically operate on one-year lease agreements. Instead, most tenants sign three-year agreements at a minimum. This reduces turnover (and the hassle and cost associated with it) and also helps ensure stable cash flow for your business.

3. Less risk

Another reason for investing in CRE is that it is less volatile. You can secure long-term lease contracts from clients for as long as 3 – 5 years, sometimes even longer than that. By doing so, you are already ensuring your profit for the next half a decade or so, regardless of what economic swings the future might bring.

4. Less competition

Another thing that we don’t appreciate in residential property investment is that it is incredibly competitive. Due to their large structures, expect your competitors to be less in commercial real estate. What’s more, is that CRE offers a great variety of different establishments. Think of them as niches. The more specific your niche is the less competition and more clients you’ll have.

5. Fewer problematic tenants

Tired of dealing with residential tenants who just won’t pay up or will leave the place in shambles after their lease is up? Sick of tenant disputes and renter complaints? With commercial real estate, things are usually a bit more professional. Since you’re working with business owners – ones with reputations to protect and dollars on the line – they’re typically more careful in both working with landlords and following the rules. This results in a lot less hassle for the investor/ property owner.

6. Increased value over time

Finally, one of the secrets of success in real estate is making sure that your property appreciates its value over time. That can be difficult to do with residences, especially if you don’t have much space to work with. Commercial real estate, though, is another thing entirely. There’ll always be a new amenity that you can add or a feature that you can install. Plus, if you have secured a prime location where tenants will thrive, then other investors will surely fight over your property should you decide to sell it in the future.

Final thoughts

Investing in Commercial Real Estate is a huge undertaking, true, but it also offers a lot of benefits. Not only does it have a faster ROI rate, but it also has fewer risks. The best thing about it, though, is that it’s fairly easy to triple its value with just a few tweaks.

Compare listings

Compare