Why Investors Prefer Commercial Property Investments

Image Source: EvinDC

Image Source: EvinDC

Real estate is the one investment that every investor around the globe is agreeing on right now. However, there is a distinct difference between what investors are investing in. Many are trending toward small partnership structures and are looking to popular international cities and secondary markets.

Beginners often launch into real estate investing with residential single family homes or condos. The more accredited investors often choose commercial investments such as retail, multifamily, office and retail.

There are four primary reasons experienced investor chooses commercial property.

1. Liability

Dealing with residential homes and condos comes with additional quirks. This applies no matter where you are investing in the world. Besides homeowner and condo associations and their rules, there are many regulations which pose liability for residential landlords. There are many protections for residential tenants, with some areas often siding with the renter over the landlord. Commercial landlords and lenders avoid these pitfalls and regulations.

2. Scale

It’s normally easier to scale investments in commercial property. Rather than investing alone in one property at a time, commercial investors enjoy more leverage. They can leverage better financing terms and partnerships to get involved in multiple investment opportunities. Also this allows them to participate in larger projects, which can be more profitable and carry less risk.

3. Diversification

Commercial properties can offer more manageable and profitable diversification. Seasoned property investors know that diversification is critical to long-term portfolio performance and consistent cash flow. Trying to stay on top of single family homes or condos spread across the country, internationally, or even your local city can be tough. It can be expensive and time consuming. Multi-tenant commercial real estate also builds in extra diversification to each property invested in.

4. Ease of Management

There are single family property management companies and real estate agents that provide it as a side business. However, residential property management is can poor, with plenty of horror stories and it can be costly.

Commercial real estate is virtually always professionally managed and more efficient to manage, providing freedom and confidence.