Investing in commercial real estate is usually a smart move. However, for some investors, the results are less than they desired. If you are thinking of venturing into commercial real estate, here are some advantages and disadvantages to consider.
Why Should You Invest?
The obvious reason to invest in commercial real estate is the earning potential. Depending on the property, its location, and the demand for housing, you could easily start to generate income within a short period of time. Even with expenses, such as repaying a starter loan, you could still have an annual return that makes it worthwhile.
Another reason for investing is that the hours of operation for your business are limited. In most instances, your business hours would be limited to the normal 8 to 5. Of course, there would be the occasional emergency situation, such as a plumbing issue, but if your properties are carefully managed, you can reduce the occurrences of these emergencies.
If you decide years later that you want to sell your business, you might be surprised to find that your property has increased in value. With proper care and renovations combined with the increasing need for housing, your purchase now could pay off big time for you later.
What Are the Drawbacks?
Commercial real estate has many more benefits that you should weigh, but you also need to consider the possible drawbacks. For instance, once you invest in real estate, you become a landlord. As a landlord, you are responsible for keeping your properties occupied. Vacant properties only serve to cut into your earning potential.
In addition to that, you have to be responsible for all expenses related to the upkeep and ownership. For instance, property taxes must be paid for each property that you own. Unfortunately, the rates do rise and you could be forced to make a difficult decision, such as increasing the rent for tenants.
Another potential drawback is that you will need a considerable amount of capital to start your commercial real estate business. Not only do you have to worry about the cost of actually buying the property, there are initial charges, such as upgrading the property, that require funds. Fortunately, if you have an investor or qualify for the right loans, you can get the funds needed to jumpstart your business.
When it comes to starting a commercial real estate business, there are some risks. However, the benefits can outweigh the risks if you tackle the issues properly. Talk to investment companies like Better Returns, LLC. for more information.
Share13 April 2017
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