Whether you’re newly acquainted with South Jordan real estate investing or have owned rental properties for quite a long time, you may be assessing the possibility of transitioning into a commercial property landlord. For quite a lot of investors, this is not a course of action that should be carried out heedlessly. This has to do with the fact that owning and managing residential rentals is very different from owning and managing commercial properties.
A commercial property, by definition, could involve retail, industrial, office buildings, and apartment and mixed-use buildings. To effortlessly manage these kinds of buildings, there are a few things you have to know. Prior to finally deciding if investing in commercial properties is the right path for you, it’s crucial to understand both the pros and cons of doing so. Moving onward, we’ll look closer at both, likewise to discuss particular tips on what it takes to develop to be a good commercial property landlord.
The Pros
When investing in commercial real estate, one of the potent attractions for investors is the income potential. But take note that while your initial investment in commercial property will be much higher than single-family residential rentals, in most situations, you can confidently expect a higher annual return on your investment also. A multifamily apartment building with quite a lot of tenants, as an instance, can most likely result in your rental income exceeding your costs enough to guarantee a tidy net profit each month.
Some investors also want to invest in commercial rentals for the simple reason that it gives you the chance to work with your tenants more professionally. If you own retail or office buildings, your tenants will be business owners, which will help you to keep your relationships with your tenants polite and professional. Additionally, business owners are commonly mindful to preserve their rented spaces in decent order, especially if they offer products or services to the general public. This can enable you to more easily maintain your property’s condition over the long term.
The Cons
Besides the benefits of owning commercial rental properties, on the flip side, there are a few disadvantages as well. We’ve already discussed the larger initial investment you can expect to prepare to purchase a commercial property. However, there are other, commonly larger, costs and risks that are involved.
The more people are using a building, the more maintenance and repair it consequently needs. Staying on top of property maintenance for one or more commercial buildings can be quite an expensive and time-consuming task, so it’s vital to see to it that you have the budget and the dedication to attain this.
Another risk linked to commercial rental properties is the risk of injury. Similar to the fact that larger numbers of people will increase maintenance costs, it also intensifies the chance that someone will be hurt or cause intentional damage to the building and grounds. Not only will you actually need high-quality insurance to help protect you from such risks, but on the flip side, it may equally be critical to litigate injury claims or other lawsuits more often. If you are seriously risk-averse, being a commercial property landlord may not be the right path for you.
Tips for a Commercial Property Landlord
If you are seriously considering investing in commercial properties for your next business venture, it’s significant to start this on the right foot. To find certain success as a commercial property landlord, here are a few tips to doing a nice job:
- Start with Residential Properties. If you are unskilled in investing in rental real estate, it can be effective to start with single-family rental properties before ever moving to commercial buildings. Looking after single-family properties is kind of slower-paced and would be less demanding overall for you as well.
- Be Proactive About Maintenance. As the saying goes, an ounce of prevention is worth a pound of cure. By staying on top of maintenance and repairs, not only can you keep your tenants in place for a long time, but besides that, you can as well keep secure the value of your property.
- Mitigate Risk. If you haven’t already, you should take appropriate actions to bring your property up to code, precisely where your tenants’ health and safety is concerned. Think about including an alarm system, sturdy locks, and even a fire sprinkler system, if indeed, fitting to help you handle risk.
- Learn to Negotiate. Commercial leases are less predictable than those used for residential rental properties. Most things can be negotiated. Not only will you require an expert you can trust to help you draft your lease documents, however, but you need to and should work with your tenants to make an agreement that will be advantageous to everyone.
Ultimately, only you can decide whether investing in commercial rental properties is a good option for you. A lot of commercial property landlords find the job tough and difficult, with competing demands on their time. But really, the perks can make all the hard work and effort worth it.
Are you seriously looking to add a new investment property to your portfolio? Real Property Management Wasatch is your solution. Our South Jordan 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 801-889-1517 or contact us online.
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