It is quite common for most people to enter the real estate market with residential investments in mind. They want to buy homes to sell them later. They want to invest in vacant lands that they can sell later for someone to build a house for their family. Another way they invest in the real estate market is through property flipping. However, a lot of people completely ignore commercial real estate.
Anton Senderov, a well-known figure in the world of real estate investments, says, “Not a lot of people are aware of the benefits of investing in commercial real estate. In fact, some people think that real estate investments are all about residential properties, but of course, that’s not true.” Why does Anton Senderov believe more people should invest in commercial real estate? Let’s find out.
Bigger Returns Are Easier to Generate
With residential real estate, you usually have a house that can only be occupied by one family. Of course, you can have multiple floors in the house and accommodate more families. However, the rent you can charge them every month will still depend on the rentals in the real estate market around you. On the other hand, if you invest in a commercial property, you could increase your rent based on how well your property is performing. What does that really mean? Well, you have to see how well the businesses that your building accommodates are performing.
If all the businesses are doing great and earning great revenues, this means you can increase the monthly rent for others that will occupy the building later. It all depends on what types of businesses are running in your building.
Tenant Issues Are Rare
One of the biggest challenges that you will face with renting out residential properties is dealing with tenants. These are ordinary people with several problems. Depending on how well-off or financially challenged they are, you could expect some confrontations with them. Secondly, they might not take care of the property too well because they are thinking about moving to a new place soon. On the other hand, it’s usually businesses that occupy your commercial building. These are companies that have to be professional with how they use the building because it represents their business in front of their customers.
In other words, you can expect fewer property management related issues when you own a commercial property. These buildings might not even be used as frequently as homes. Think about it, a house is occupied by a family 24/7. On the other hand, when it comes to commercial spaces, they are usually operational during the day time and closed during the night time. This means your property is not that frequently used and thus you will run into fewer maintenance issues.
More Space Means More Income
According to Anton Senderov, “There is no doubt that entering commercial real estate requires a bigger upfront cost, but it also rewards you in a similar way. A commercial building will almost always accommodate at least 5 units, which means you have more inlets that can earn you an income. On the other hand, most of the residential buildings are designed to accommodate either one or two families. The most you can go with residential buildings is 4 units. Even then, you will have people living in those units.
On the other hand, with a commercial property, you have corporate businesses occupying the space, which means you will generate bigger income from every unit. Last but not least, don’t forget that the lease contracts have relatively longer terms in commercial real estate.
Final Thoughts
With these benefits in mind, Anton Senderov believes that more people should be thinking about commercial real estate investments. Bigger risks come with bigger rewards and the rewards in commercial real estate are almost always higher compared to those that you can expect when you invest your life saving savings in residential real estate properties.