Question

Identify the advantages and disadvantages of investing in commercial real estate both directly and through intermediaries. ( 500 word )

Answer 1

Potential sales. Earning potential is the best reason to invest in business over residential rentals. Commercial properties typically have an annual return off the purchase price between 6% and 12%, depending on the area, which is much higher than usual for single-family homes (1% to 4% at best).
Personal Relationship Small business owners are normally proud of their enterprises and want to protect their livelihoods. Commercial property owners are not typically individuals, but LLCs, and as a company they run the property. The landlord and the landlord therefore have more business-to-business customer relationships

The eye of the world. Retail investors have a vested interest in keeping their shop and storefront, because if they don't, their company will be affected. As a result, the interests of commercial tenants and property owners are matched, allowing the owner to maintain and improve the quality of the property and eventually the value of their investment.

Reduced business hours. Normally companies go home at night. In other words, when they work, you work. By calling for break-ins or fire alarms at night, you should be able to rest at night without having to think about getting a midnight call because a resident needs repairs or has lost a key.

Time commitment. You have more to do than you do with a residential property if you own a commercial retail building with five tenants, or even just a couple. You can't be a landlord who is absent and increase your investment return. Numerous contracts, annual CAM modifications (Common Area Maintenance expenses for which tenants are responsible), further maintenance issues, and public safety problems are likely to be discussed with commercial. You've got more to handle in a nutshell; and just as your tenants need to think about the public eye, so do you.

Initial investment is larger. Usually, purchasing a commercial property needs more money in advance than acquiring a residential rental in the same location, so getting your foot in the door is often more difficult. You should expect some large capital expenses to follow once you have purchased a commercial property. For a couple of months, your property may be going along and wham, here's a $10,000 bill to fix roof repairs or a new furnace. There are more services to operate with more customers and hence more prices. How you hope is that the revenue benefits outweigh the expense gains, to help you purchase a commercial property over a residential property.

More threats. Properties designed for commercial use have more tourists to the public and thus have more people every day on the premises that can get injured or do something to harm the house. In parking lots, cars can reach customers, people can trip on ice in the winter, and vandals can spray the building's sides. Incidents like these can occur anywhere, but when investing in commercial properties, chances of witnessing something like these events increase. If you are at risk, you might want to take a closer look at putting your money into residential properties.