What Every Commercial Real Estate Investor Needs To Know

Commercial Real Estate

Commercial real estate investing is unique in many ways. Even if you have experience investing in residential real estate, commercial property has a few fundamental differences. Here are a few tips that you should know before you start buying commercial property:

  • Commercial real estate offers higher returns. One of the reasons that investors are interested in buying commercial property is that they can earn an extra 100 or 200 basis points in commercial property as opposed to residential. If a residential investment returns 6 percent, commercial investments can possibly return 7 to 8 percent.
  • Income from commercial real estate is cyclical. When you rent to businesses, your income is directly tied to the prospects of the businesses that occupy your building. When the economy is good, demand for commercial space is high and rents go up. When times get tough, though, businesses pull back and close, reducing rental income and occupancy.
  • Commercial real estate carries tax advantages. Before buying commercial property, talk to your accountant to find out how you can maximize its GST benefits. Depending on how you hold and transact the property, you might also be able to limit your CGT liability on profits as well.
  • Prepare for unexpected expenses. One of the drawbacks of commercial property is that when expenses come up, they can be large. Vacancies can take months to fill and require you to pay leasing commissions and to pay to configure the space for a new tenant. Repairs to commercial properties typically need to be done by professional workers and can be on a much larger scale than repairs to a house or an apartment unit. Preparing for these expenses is a fundamental part of owning commercial property.
  • Commercial real estate is scarce. If you’re looking to buy an investment house, there are many to choose from. You might only have one or two commercial properties that fit your goals, your budget and your geographical preferences available at any given time, though. As such, moving quickly and decisively is a key part of buying commercial property. This can come back to benefit you when it’s time to sell a desirable property, though.
  • Finally, successfully buying commercial property requires one more thing: expert help. Working with an experienced commercial real estate agent can give you the access to information and to properties that will enable you to find the right investment for you.

About the author: Oliver Finney is a real estate enthusiast. He is fond of learning new things and insight such as property selling and buying, choosing properties and other related topics. With this, he also writes articles about real estate and one of his resources is www.wrightproperty.com.au.

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