If you’re an aspiring commercial real estate developer who’s faced some setbacks, you may be starting to wonder if a residential property would be an easier and safer investment.
There are actually many reasons that commercial real estate developers choose the projects they do. Commercial properties have a much higher income potential than properties like apartments. There’s a higher annual return off purchasing price, and money can be collected from more tenants.
The relationships with those tenants are often more comfortable as well. Instead of a renter/landlord relationship, interactions tend to be a lot more professional, business-like and polite. You also won’t have to be at your tenant’s beck and call all hours of the night. Most businesses operate during business hours, so it’s less likely you’ll get a call in the middle of the night unless there’s a break-in or fire alarm.
Tenants also have an investment in keeping their business maintained and clean, so less of that workload will fall on you. Their attention to cleanliness will reflect well on your business and their own. It will also improve the value of the property over time.
Property value will also be evaluated more objectively, based on the owner’s income statement. Residential properties are often subject to less tangible pricing factors, like appearance, atmosphere and location. You’ll have a much easier time naming a price for a commercial property than you would for a residential property.
Commercial real estate developers can also be more flexible in their lease terms. There are fewer laws governing commercial leases, since they don’t affect public safety as severely as a living area would. There are many laws and regulations governing residential real estate, and sometimes it just isn’t worth it.
Consider looking into commercial real estate investment firms if you’re still not sure where to get started.
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