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6 Great Reasons to Invest in Commercial Property

July 14, 2020 by in Commercial Real Estate

Many people may find it hard to choose between commercial and residential real estate investment. If you are looking for high profits, do not want to deal with much competition, and will put in the hard work, look into investing in commercial property.

Here are some pros of buying best commercial real estate for investments in Denver over residential property.

Potential of high income

The earning potential is high with commercial properties typically receiving between 6% and 12% annual return on the purchase price—higher than single-family homes with 1% to 4% on average.

Flexible and longer lease terms

A commercial lease could also last for up to 10 years. Less cost of turnover, fewer vacant rates, and more reliable cash flow are the advantages of a longer lease. Commercial properties also have fewer consumer protection regulations, unlike residential real estate that must have security deposit limits and termination rules under many state laws.

Professional property owner-tenant relationships

Commercial property owners are usually not individuals but LLCs and own properties as a company. Thus. the property owner and the tenant have more of a professional relationship.

Unbiased price evaluations

Evaluating the land value of commercial properties is also simpler since you may ask for the income statement of the current owner. The selling price can be set at a level at which an investor can receive the prevailing cap rate for the market if the seller has an experienced broker. In contrast, many residential properties are sold on more emotional pricing.

Triple net leases

As the property owner, you do not have to pay any expenses. The tenants pay all property costs, plus real estate taxes. Well-known companies like Walgreens and Starbucks usually sign these lease forms. When property costs are passed to the tenants, tenants and the landlords can quickly predict how much they receive per month.

Better public appearance and increased land value

Tenants understand they need to maintain their stores and storefronts well as their physical appearances and in-store cleanliness affect their business. Thus, the interests of the tenants and property owners are matched and help boost the value and quality of the property.

Commercial real estate investing is, in most instances, a high-risk partnership with high returns. Compared to residential properties, commercial real estate typically provides greater returns and cash flow. Commercial property owners with lots of space can have more tenants and therefore make more money.

Want to invest in commercial real estate? Pinetree Financial Group can help you get you started on getting a commercial real estate loan. Call us today.

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