Investing in Commercial Real Estate – Pros and Cons

You may consider is pretty logical to invest in commercial real estate after working in residential real estate for quite some time. Nevertheless, commercial real estate can prove to be a different animal altogether. From investing to managing the property, you might need to have different set of skills as compared to that required for residential real estate investment.

While you can practically learn about investing in commercial real estate only by jumping in the field, you must have proper knowhow about different pros and cons of this business.

Advantages of investing in commercial real estate

Financing in more flexible

The major advantage of investing in commercial real estate is that it gives investor the ideal flexibility one can wish for. Normally, we need to raise a big chunk of money by any means to start business by investing in residential real estate, but one can invest in commercial real estate even with no private money in hand. The financing that we will need in this regard is auxiliary. With that said, you only need to pay one mortgage of the multi-unit building you own. That too will not bother much when you will have the rent coming from multiple units.

Ease in negotiation over maintenance

With more units in your building, you can negotiate over the price of maintenance which is required on general basis. For this purpose, you can enter into a deal with your maintenance company or outside vendor. Due to the fact that you will be one of the bigger business prospects for the maintenance companies, you will surely be in a better position to negotiate over the price of maintenance. Furthermore, hiring a dedicated maintenance staff doesn’t remain something which is out of reach when you have more units to maintain.

Drawbacks or challenges of commercial real estate

Although, there only a few challenges of commercial real estate management, they are not easy to overlook. In fact, there is a need of robust strategy to deal with those challenges.

The competition

Due to the potential of commercial real estate, many people tend to make profit for better living. With consistent exterior and interior renovations, they try to increase the value of their properties. Thus, if you really want to live in the market, you need to make sure that you are ready to catch up, preferably stay ahead, in the competition.

The management challenge

A part of this factor is also associated with the competition factor in a manner. With that said, you need to make sure that you or your management team is quite good at handling matters in a robust way. the poor management can make the tenants develop some concerns regarding maintenance and rent.