But what makes commercial property investing so much better than other types? Let’s take a look.
Companies Won’t Squat
Squatters rights, squatting and unpaying tenants are continual problems for residential property investors. Laws mean that it’s hard to get rid of people who fail to pay.
But in the commercial sector, that’s rarely a problem. If a company runs out of money, it usually goes bankrupt and can no longer afford to hire people to work in its buildings. Thus, once it goes bust, control of commercial premises quickly reverts back to you. You don’t have to hire eviction staff to remove workers, still desperately typing away at their keyboard. The moment the money stops flowing, everyone just goes home.
Companies Have An Incentive To Maintain Your Property
As property expert and adviser, Jacob Kupp, points out, companies, unlike regular residential tenants, actually have a real reason to keep your premises in good condition. If premises look shabby, it’ll put off customers, clients, and other people using the facilities. And that could harm their profits. So, in many cases, they treat your property as if it is their own. It’s in their interest to do so.
Leases Are Longer
Here’s another big benefit of commercial property investing: companies are often willing to sign much longer leases than residential tenants. Most regular homeowners will agree to sign up for six months to a year. But very few will want to commit for longer than that, just in case their circumstances change.
However, businesses often have long-term plans which make them much more likely to agree to something longer-term. You could potentially sign up companies for five years or more, guaranteeing a steady stream of income long-term, allowing you to make a big return on your initial investment.
It’s More Diversified
Think for a moment about the sheer range of companies and industries out there. There are an incredible range of businesses, all requiring quite different facilities from each other. That contrasts to the residential market where everyone essentially wants the same things.
This fact allows you to better diversify your commercial property portfolio. You could own a combination of retail outlets, office space and industrial facilities. If one sector struggles, you can still collect rents from the others.
It Is Not Correlated With Other Asset Classes
Lastly, commercial property is a great investment because it is usually uncorrelated with other investment classes. The value of the rent you receive from tenants doesn’t go up and down with the vicissitudes of the stock market. Instead, it tends to remain fairly steady over time, regardless of what the S&P might be doing.
Investing in commercial property is easier than many people imagine. You can invest in funds if you don’t want to put your money into it directly.