7 Guaranteed Benefits of Investing in Commercial Real Estate
Investing in commercial real estate can be a great investment opportunity. Commercial properties, including office buildings, multifamily buildings, industrial buildings, and more, often provide better financial returns.
Our CRE experts at Terra Alma suggest these 7 guaranteed benefits of investing in commercial real estate.
What are Some Types of Commercial Real Estate?
Commercial real estate includes:
- Retail buildings
- Office buildings
- Warehouses
- Industrial buildings
- Multifamily buildings
- "Mixed-use" buildings, and more.
Each type of property has its management challenges and considerations.
Pros of Investing in Commercial Real Estate
1. Flexible Lease Terms
Commercial leases are regulated by fewer consumer protection laws compared to residential leases, which are governed by numerous state laws like security deposit limits and termination rules.
2. Limited Operational Hours
Businesses typically close at night, so you only need to work during their operating hours. Aside from emergency calls for incidents like break-ins or fire alarms, you won’t need to worry about receiving late-night calls for repairs or lost keys.
Also, commercial properties often have alarm monitoring services to alert the authorities if something happens after hours.
3. Professional Networking
Small business owners typically take pride in their work and want to protect their businesses. Commercial real estate is often owned by LLCs rather than individuals and is operated as a business.
This creates a business-to-business relationship between landlord and leaseholder, promoting professional and courteous interactions.
4. High ROI Potential
One of the biggest advantages of investing in commercial real estate is the higher ROI potential. Commercial properties usually offer an annual return of 6% to 12% of the purchase price, depending on factors like location, the economy, and external events (such as pandemics).
5. Alignment of Interest
Commercial leaseholders are motivated to keep their properties well-maintained because it directly impacts their business. This alignment of interests between commercial leaseholders and landlords helps ensure the property is well-kept and improves the quality and value of the investment.
6. Realistic Price Evaluations
Evaluating the prices of commercial real estate is easier. You can request the current owner's income statement to determine a fair price. Our commercial real estate experts at Terra Alma recommend the asking price should align with the area's prevailing cap rate for that type of commercial real estate (such as retail, office, or industrial).
7. Triple Net Leases
Triple net leases have variations, but the main idea is that you don't pay for property expenses as a landlord. The leaseholders cover all property expenses, including real estate taxes.
Companies like Starbucks often sign these leases to maintain their brand’s look and feel, making them low-maintenance income sources for investors. While strip malls may use various net leases and smaller businesses might not typically use triple nets.
These leases are ideal for investors in commercial real estate.
Conclusion
Investing in commercial real estate has many benefits. You get more ROI, fewer laws to follow, and less work at night. Businesses take care of their spaces, prices are easier to check, and leases can be simple. It's a smart choice for making good money.
If you’re unsure or need more guidance before investing, contact Terra Alma for a professional commercial real estate advisory in Atlanta.
FAQs
1. Is it safe to invest in commercial real estate?
Yes, investing in commercial real estate is safe if you do thorough research and consult with professionals.
2. What is a good ROI for commercial real estate?
A good ROI for commercial real estate typically ranges between 6% to 12%, depending on various factors.
3. Is CRE a good investment in Atlanta?
CRE can be a good investment in Atlanta, but it depends on market conditions, property location, and other factors.
4. What type of CRE is most profitable?
Generally, industrial and multi-family properties tend to be the most profitable types of commercial real estate.
5. How to invest in CRE?
You can invest in commercial real estate through direct ownership, real estate investment trusts (REITs), or crowdfunding platforms. We recommend consulting with a professional for a profitable and safe investment.