Three Things to Know Before Investing in Commercial Real Estate
It is common for real estate investors to start off investing in residential properties because they are more comfortable with buying houses. Many of them, often investing in residential properties without knowing the benefit of investing in commercial real estate, and unaware of the fact that investing in commercial real estate is a great way to diversify one’s investment portfolio. Investing in commercial real estate provides investors with tax incentives, a higher potential for income and returns, a more secure investment, and less competition.
Prior to investing in commercial real estate, here are a three things you’ll want to know before making a decision:
Know your tenants
If you’re about to or have just acquired a new commercial property, consider taking the time to familiarize yourself with it. If there are existing tenants in the property and your intention is to continue leasing out space, will these tenants be planning on renewing their leases? Do they make their rent payments consistently and in a timely manner? Keep in mind that when it comes to tenants, you have the good, the bad, and the “you don’t want them” tenants. Which category will these tenants fall under?
Know how to make a profit
Investing in a commercial property is similar to investing in a business. You invest to make a profit, and just like a business, there are a number of ways that a commercial property can make a profit. Some of these include revenue from rental income, property value increases due to appreciation, upgrades to the property that increase its value and fetch a higher selling price, and rent inflation.
Know who’s going to manage the property
When you own a commercial property, you are faced with the decision of whether to manage the property on your own using your own resources or to outsource the responsibilities of managing the property to a Tampa commercial property management company. Hiring a commercial property management company in Tampa will allow you more time to focus on revenue generating activities, and less time dealing with maintenance and tenant issues.