Understanding Commercial Real Estate Investment
Investment in commercial real estate is growing in popularity as investors seek more lucrative opportunities outside of the overcrowded residential sector. Unlike traditional residential property investments, the country’s commercial property market is robust and can provide highly predictable yields.
Investments in commercial real estate can be made either directly or indirectly. Direct investment is when you buy your own business property and rent it out. This is a terrific method to invest if you want to remain in charge of your investments and take a “hands-on” approach.
Property funds are a type of investment vehicle that lets you combine your money with that of other investors and invest it in commercial real estate. This is a good alternative for people who don’t want to be involved in investment decisions or who don’t have enough money to purchase a whole commercial unit on their own.
How does commercial investment property work?
- Investing in commercial property:
Most people use a commercial investment mortgage, a sort of commercial financing, to finance the purchase of a commercial property. Investment commercial real estate is frequently bought with a tenant in place. It is always a good idea to have your lawyer study the lease before agreeing to the purchase because the terms of the lease are already set out. The market can appear a little foreign to novice commercial real estate investors, but surrounding oneself with seasoned experts can make the process much simpler.
2. Understanding commercial leasing:
The legal document that details the conditions of the contract between the landlord and tenant is the lease. It’s crucial to get commercial leases in India properly reviewed because they are often approved for a set period of time. Fully repairing and insuring leases place the tenant in charge of all property maintenance and insurance costs for the duration of the lease. Other leases might place the burden of repairs and insurance on the landlords, which could result in extra costs that reduce your profits.
Commercial leases should also be scrutinized for break clauses, which specify a time frame within which the agreement may be terminated, and rent reviews. Rent evaluations may simply be upward, or they may allow for both an increase and a decrease in the rent. Of course, upward-only rent evaluations provide you with more assurance about your future income.\
3. Management of the property:
The comprehensive maintenance, insurance, and management of commercial property ought to be less complicated than that of residential property. However, since issues occasionally arise, it may be a good idea to first contact a seasoned commercial letting agent.
Working with a real estate consultant might be a smart choice because renting out a vacant commercial property requires more expertise than renting out a vacant residential property.
Why does commercial real estate investment make residential investment less attractive?
Landlords of residential properties can only dream of the excellent yields, multi-year leases, and even fully repairing leases that come with commercial investment properties. These leases guarantee that your tenant will occupy the property for the duration of the lease and will take care of any necessary maintenance.
How do you increase your commercial real estate property returns?
- Try to reduce your turnover:
The cost of a large number of rental properties is mostly determined by turnover. Both residential and commercial properties experience a negative financial impact from tenant turnover. You almost certainly lose rental income while a rental property is vacant, and you also incur greater maintenance, repair, and capital upgrade costs to get the space ready for a new prospective renter. By entering into long-term leases with reputable tenants, maintaining the property in top condition, and attending to the tenants’ demands, tenant turnover can be reduced, which immediately improves the Net Operating Income and cash flow.
2. Tax assessment
Property taxes are frequently one of the biggest costs associated with owning commercial real estate property, according to an analysis of the expenses for the majority of rental properties. In many parts of the country, property taxes and commercial real estate values are frequently associated. If this is the case in your area and CRE property values are falling, get in touch with your local assessor and inquire about seeking a reassessment. A lower assessment will directly lower your property tax bill, which will increase your cash flow.
How can Fairdeal help?
Utilizing market knowledge to bring in high-value tenants
Through thorough market research, shortlisting, and lead generation for property sale and leasing, our seasoned commercial property matchmakers connect the best tenants with commercial property owners listed on Fairdeal.
At Fairdeal, we offer:
- Property management
- Landlord representation
- Market benchmarking and analysis
- National and international marketing strategies
- Lease analysis including projected returns
Want to learn more about why landlords should list their property at Fairdeal? Contact us today!