Whether you are a newbie to Suwanee real estate investing or you already own rental properties, you could be thinking about becoming a commercial property landlord. For most investors, this is not a decision that should be made lightly. That is because owning and managing residential rentals is very different from owning and managing commercial properties.
By definition, a commercial property could include retail, industrial, office buildings, and apartment and mixed-use buildings. There is a particular set of know-how needed in order to effectively manage these types of buildings. You have to carefully consider the pros and cons of investing in commercial properties if ever you decide to do so. This article will give you a closer look at both, as well as give some tips for becoming a good commercial property landlord.
The Pros
One of the strongest attractions for investors is the income potential of investing in commercial real estate. Even when initial investment in commercial property will be much higher than single-family residential rentals, a higher annual return on your investment can be expected. For example, a multifamily apartment building that can accommodate several tenants can give you enough rental income to exceed your costs and ensure you a tidy net profit each month.
Many investors like investing in commercial rentals because it allows them to interact with their tenants more professionally. If you own retail or office buildings, your tenants will be business owners, which will help you keep your relationships with your tenants polite and professional. Most business owners also want to keep their rented spaces in good shape, especially if they are offering products or services to the general public. This can help you more easily maintain your property’s condition over the long term.
The Cons
These benefits of owning commercial rental properties also come with particular downsides. The larger initial investment you have to make to purchase a commercial property is already a given. But there are other costs and risks involved as well.
When you have more people in a building, maintenance and repair need usually rise as well. To always be on top of property maintenance for various commercial buildings can become an expensive and time-consuming task, so it is important to have the budget and dedication to really do so.
Another risk related to commercial rental properties is the risk of injury. Just as more people in the building will increase maintenance costs, it also increases the chances of someone getting hurt or causing intentional damage to the building and grounds. You might need more than just good quality insurance to help protect you from such risks as you might need to litigate injury claims and other lawsuits more often. If you are very risk-averse, you might want to rethink being a commercial property landlord.
Tips for a Commercial Property Landlord
If you do invest in commercial properties as a new business venture, it is important to start on the right foot. Up next are a few tips to find success as a commercial property landlord.
- Start with Residential Properties. It is wise to start with single-family rental properties before moving to commercial buildings especially if you are new to investing in rental real estate. Single-family properties are generally easier to manage and tend to be less demanding.
- Be Proactive About Maintenance. As the saying goes, an ounce of prevention is worth a pound of cure. When you are on top of the maintenance and repairs of your property, not only can you keep your tenants longer, but you can protect the value of your property as well.
- Mitigate Risk. Make sure you bring your property up to code, especially when it concerns your tenants’ health and safety. An alarm system, sturdy locks, and even a fire sprinkler system are good investments to manage risk.
- Learn to Negotiate. Commercial leases are less predictable than those used for residential rental properties. You can negotiate almost anything. Let a trusted expert draw up your lease documents, and, at the same time, work with your tenant to reach an agreement that is favorable to both parties.
In the end, only you can decide whether or not you will invest in commercial rental properties or not. Most commercial property landlords find the job challenging, with competing demands on their time. But the payoffs can make all the hard work worth it.
Are you looking to add a new investment property to your portfolio? Real Property Management Executives Greater Atlanta is your solution. Our Suwanee property managers work with investors like you to help you find off-market deals, efficiently manage your property, and much more! You can call us at 678-504-8580 or contact us online.
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