Many investors are afraid to invest in the
commercial real estate.
Sometimes, they think this area is reserved for real estate moguls. Others
simply do not think they are up to it. And yet! The commercial real estate is
much more accessible than one might think, especially since there are several
advantages to this type of investment. Here are ten reasons that investing in
the commercial real estate is a winning option.
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| Arthur Vasquez |
A SAFE INVESTMENT
The commercial sector is not immune to the market turmoil. However,
commercial leases are always secured by either a mortgage or other personal or
business guarantee.
MORE FLEXIBILITY IN TERMS OF PURCHASE
It is easier to proceed without the bank since financing by the seller is
more common. We then speak of sales price balance.
STABILITY OF TENANTS
To maximize their
investment, companies, and people in business tend to stay
longer in a building as residential tenants.
BUSINESS RELATIONSHIP WITH TENANTS
It is in the interest of business managers to maintain good relations with
the owner of the building they occupy. So does the image of their company.
"NET" AND "TRIPLE NET" LEASE
Many companies avoid owning the building they occupy, mainly for tax
reasons. These companies prefer to hire locals but pay part or all costs
associated with the building, such as taxes, insurance, and maintenance. We
then speak of:
"Net" rent: The tenant pays some or all of the property tax in
addition to the basic rent.
Rent "supernet" (net, net): the tenant pays insurance on the space
he occupies, in addition to the basic rent and taxes.
Rental "hypernet" (net, net, net): the tenant pays not only for
the rent but also for all expenses of the building, in addition to the expenses
of improvement.
THE BUILDING PAYS MORE QUICKLY
As a general rule,
commercial buildings provide better revenues and are more
profitable, which is even more true in the case of a net or triple net lease.
LENGTH OF THE LEASE
Unlike residential leases, which are normally spread over a year, commercial
leases typically last from 3 to 15 years.
LIMITED HOURS OF OPERATION
Most companies are operational by day and closed at night. As the owner of
one of these buildings, unless there is a major glitch, chances are you'll be
able to sleep soundly at night.
THE TWO PARTIES ARE MORE EQUAL
At the time of negotiation, commercial property owners have a greater margin
of maneuver vis-a-vis their tenants than the owners of residential buildings.
DIVERSIFICATION OF INVESTMENTS
Putting your eggs in one basket is a risky bet when it comes to investing.
You will benefit from diversifying your portfolio, especially since the
commercial sector is not limited to office buildings. Do not forget the large
industrial complexes, hotels, shopping canters, small shops