Commercial Real Estate To Financial Freedom.
Commercial real estate tends to be the ignored big brother in real properties investments.
A commercial Office Building
Real estate agents tend to specialize in domestic properties for its sheer size and simplicity. But what seems to be a complicated issue is actually not as difficult as it appears. So what is the difference?
Well, structurally, a residential property is really a building like a house or a condo with a residential occupancy permit; i.e. fit for human habitation 24/7. Most residential real estate investors are really just buying a unit at a time.
But then a commercial unit expands on that idea. A commercially based residential real estate investor may actually own the entire complex and rent them out. Then there are strip plazas, mini malls, larger malls, industrial condos, office buildings, trailer parks, storage facilities, etc.
Let’s take a look at some of the reasons why this should be looked at more closely.
Since more people focus on residential properties, commercial real estate has a lower speculative value.
Rents/leases values closely reflect the real property value based on multiples often depending on the mortgage interest rates.
There is less subjective values placed upon the way the property looks or just its sheer size.
But from there, the world of commercial real estate gets really exciting if you can handle it, or really frightening if you can’t.
You will likely have multiple tenancies to deal with – it spreads the risk and also increases the work.
You wil likely have great leverage – financing costs can remain static – but rents/leases and property values can be increased with time.
A really good commercial real estate lawyer can tune the tenant/landlord deal to get you out of really expensive and unfair situations.
There’s much less of an emotional issue when dealing with peoples’ homes – it’s mostly business.
Often property taxes are paid by the tenant and the business taxes are borne solely by the tenant.
There are many more deductibles that you would not normally get with residential real estate – get a good real estate tax accountant to help you.
Just a quick comment – most investors in commercial real estate tend to have far better cash flow than residential ones. That alone should make any real estate investor sit up and take notice…
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