Investing money in a property is a risky game. The risk is not about just investing the money, it’s all about ‘how’ and ‘where’ should the money be invested? And what will be the pros and cons of it? You want to purchase a property? You must need to know the major pros and cons of the property you are interested to buy.
The two major types of property include residential and commercial property. Commercial properties have further categories, like, buildings for offices, apartments, retail, industries, and warehouses. Each kind of property has its own direction, dominance, and risks. You need to reckon all the economic factors prior to investing in the property.
Add the following things into your list in advance when you are ready to put a step in this venture:
- The demand of the business and services you provide
- The requirements of the consumers
- The variation between the residential and commercial market
- The effect of the population in that area and bringing innovation into the market.
Let’s discuss some of the fundamental pros and cons of investing money in commercial property.
Pros of Commercial Property Investing
The more wisely you invest, the more you will gain the profit. The financial gain from a residential investment is 3-5%. Whereas commercial properties let you gain a double profit of about 6-12%. And it is a really good figure.
In commercial properties leases are long-term and flexible. The tenants don’t leave the property frequently; the stay lasts for about five to ten years or longer.
Professional and Public Association
In the commercial market, the owners of huge businesses deal with the public and customers. It makes their association more professional than a small growing business owner. Small businessmen deal with the small market area.
The owners of residential markets have to maintain their property or stores to attract the customers. It helps to run their business well. But commercial business owners maintain the quality of the business and property to gain popularity in the commercial market.
No Furnishing Price
If you buy a residential property like a house, you need to get it furnished before handing it over to the tenant. You must add the basic home needs into the property. But, for commercial property, there is no need to spend money on its furnishing. You can give it to the tenant just as it is. The tenant will furnish the property by himself according to the type of business he owns.
Cons of Investing Money in Commercial Property
Finding a New Tenant
The leases are long-term in commercial properties rather than residential. So, if the property is vacant, it needs more time to find out a new tenant. Meanwhile, the landlord has to pay to cover the cost of the property.
Affected by the economy
Commercial properties are more sensitive to the economy than residential properties. When the economy goes down, the businesses are affected by major losses. And the tenants stop paying the rent.
Commercial properties are always costly than residential ones. Due to the biggest markets of businesses in commercial areas, the property costs a huge amount of money. It is not possible for every investor to invest in such big stuff.
Difficulties Buying and Selling
Buying as well as selling a commercial property requires time, money and thorough research about the details. There should be no misjudgment by the property holder.
Think wisely before investment
If you want to make money and earn faster, you should invest in commercial property. But always keep in mind these pros and cons before investing in your future.