Residential property is a common entry point for commercial real estate investors, but eventually investors tend to experience the typical headaches that residential tenants inspire. That’s usually when investors explore the possibilities that commercial real estate has to offer. For a look at some of commercial real estate’s advantages, consider this article:
5 Major Advantages Commercial Space Has Over Residential Property
Hey there, BP! I love being a residential landlord, don’t get me wrong. As they say, people always need somewhere to live, so you can always find a tenant for your residential rental. That being said, there are some major advantages to commercial properties.
A longer lease term is one of the prime advantages of commercial real estate. Tenants in residential properties will rarely sign a lease for longer than a year, and after that many lapse to month to month. Turnover and uncertainty are real issues. But commercial tenants don’t want uncertainty. Once they establish their business in a location, they usually want to stay. This reality is reflected in the typical lease terms for commercial space.
Faircloth outlines four other advantages to commercial real estate investment: tenants perform the improvements, increased collateral, use of exclusivity, and lucrative rent and CAM charges. Here’s a bit of what he has to say about rent:
As much as rent can be discounted in the beginning, it is expected to go up as well. Many residential leases are protected by rent control laws. Those don’t apply to commercial leases, so it’s not uncommon for the rent to go up quite a bit over time. The more established the business is in that location, the more they may be willing to pay to hold that spot. Commercial leases can have a ratchet clause, which means that the rent goes up every year by an agreed upon percentage. Even though it’s a multi-year lease, the rent goes up regularly.
If you’re ready to invest in the advantages found in commercial real estate Eugene, the professionals at Pacwest Commercial Real Estate are ready to help. We’re experts in commercial real estate, and we’re prepared to help you find the right property to meet your investment goals. You can reach us at 541-912-6583.
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