If you have money to invest, real estate is always a great option as the long-term return on investment often keeps pace with the stock market. But should you invest in commercial property for sale or residential real estate? Here is a look at the benefits of commercial real estate investments.
Commercial Properties Are Less Dependent on Outside Factors
Residential properties are often priced in comparison to surrounding properties. If the house down the road just sold for X amount of dollars and another house with similar features comes on the market, it will likely be priced at a similar price point that the other one recently sold at. This can work to an investor's advantage, but it can also work against you.
Another factor that plays big in the price of a residential property is location. Ideal locations that are located in a good school district or have favorable amenities nearby, such as a park, often come with a premium in price.
With commercial real estate properties, the selling price is more often based on what the market can bear. While location can matter, it usually doesn't play as big a role in the building's selling price.
Commercial Property Tenants Are Typically More Reliable
When you own a residential property, a lot of work goes into making sure you find the right tenant. Once you find one, it's a guessing game as to whether the tenant will pay the monthly rent and utilities they are responsible for on time.
A tenant who reneges on the rent isn't going to make you money, which is the whole point of investing in real estate. By the time you go through the eviction process, not only will you not have made money, but you will have likely lost money.
Commercial property tenants have a vested interest to pay their rent each month — they own a business. In order to continue conducting business in their current location, they need to pay their bills.
Commercial Properties Suffer Less Wear and Tear
A rental property with a family is likely to suffer more maintenance problems and damage to the home. Even good tenants will break things, and their children will scuff floors, color on the walls, or flush things down the toilet.
In contrast, a tenant who rents out office space in one of your buildings typically isn't wreaking havoc on your property. Because they want their business to look good to the public, they will take extra care to maintain the space.