Should You Invest in Commercial Property to Extend Your Portfolio?

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If you’re a multi-million property investor or developer and you’re mainly involved with residential properties, you may want to consider buying a few commercial lots as well. They have lots of benefits over residential properties that you should consider, and you may even realise that you like them better than residential properties after investing in your first one.

However, you should also know that commercial lots are very different from residential ones in many ways, and there are some drawbacks. Let’s take a look at some of the advantages and disadvantages of investing in commercial property so you can get an idea of whether they’re a good option for you.

Commercial Properties Have Longer Leases

One of the most beautiful things about commercial properties is that you’ll be able to lock in tenants for much longer. 10 to 15-year leases are pretty common on the commercial side while 6 to 12-month leases are the norm for residential units. Another thing you have to think of is that you may only need to find one or two tenants depending on the type of commercial property you buy. So, you won’t have to deal with as many people or time wasters.

Commercial Properties Have More Rules and Restrictions

With that being said, you have to know that the regulations surrounding the sale, purchase, and renovation of commercial buildings are much more stringent than with residential units. There are also all sorts of inspections they have to go through to ensure compliance. One of them is fire alarm testing which has to be performed by a qualified professional once every six months, but there are many others, and you should inform yourself about what they are before you buy your first property. For more information head to Electrical Safety Certificate.

Commercial Properties Have Fewer Maintenance Requirements

One thing you should know, however, is that while residential properties will mainly have to be maintained by the landlord, commercial landlords can enter agreements with tenants where the tenant has to take care of most of the maintenance for the building. So, while you may have more regulations and inspection requirements, you may only have to perform summary maintenance on certain parts of the building and have the rest handled by the tenant.

Commercial Properties Require More of an Initial Investment and Are Less Liquid

Mortgages on commercial properties require a heftier down payment than residential properties, and the average commercial lot is more expensive than the average unit so these are things you will have to consider before you get into that sector. Another thing about commercial property is that they’re much tougher to sell, making them less of a liquid asset.

Now that you know more about the benefits and disadvantages of investing in commercial units, you can better decide if they’re the right choice for you. If you have any more questions about them, it would be a good idea to speak with a reputable agent right away and let them know what’s on your mind.

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