It’s well known that investing in commercial real estate is much more profitable than investing in residential real estate. If you know how to hold your own in the game of property management, you can make an immense amount of money through cash flow and economies of scale. Finding great deals in commercial real estate can be a difficult task for an inexperienced buyer or seller. There are some key elements to understanding the basic rules to achieve a higher payoff from commercial real estate. Here is how to get started:
Commercial Real Estate: Advantages
One of the first things you should understand when diving into commercial real estate is that the biggest thing that draws people in is the attractive leasing rates. There are often fantastic opportunities in purchasing rentals that result in great returns and monthly cash flow. Buy a building in an area where construction is limited by land or law and create a long lease contract (many last up to 10 years) to establish a stable property. Owning Commercial Real Estate can provide considerable tax benefits, such as considerable capital gains treatment, depreciation, and interest. Owners can get considerable financial leverage through mortgage loans and equity. Also, as a business owner, you can get more freedom to operate on the land as it meets your business needs vs leasing from a land owner.
Commercial Real Estate: Disadvantages
The biggest problem of working with commercial real estate is without a doubt the rules and regulations that go along with it. Taxes, mechanics, and maintenance are buried in layers of legalese that change according to state, county, industry, size, and zoning. Most investors require the assistance and advisement of a payroll company that is well researched and knowledgeable about all these regulations. You also have to worry about tenants that damage your property or demand constant renovations or refurbishing. This can cause you to lose money on your property and may make it harder to sell later.
Commercial Real Estate: Building Relationships
Despite all of the ups and downs of dealing with commercial real estate, it’s definitely possible to make great money if you’re okay with riding the constant waves of the real estate market. The best way to ensure you are making the right decisions is to constantly be building relationships with other tenants, customers, and professionals. Talk to locals, realtors, and people who may understand the process better than you so that you can learn from their mistakes. It’s often said that getting your foot in the door of becoming successful in real estate investor is determined by who you know.
Monitoring Commercial Real Estate Changes
If you’re ever feeling overwhelmed by the struggles of commercial real estate or unsure of what the best move to make is, consider working with a business that can help take on some of that stress and do the research for you. Having an extra helping hand makes all the difference, especially when you start dealing with multiple properties at once. PayTech strives to make your decisions easier by providing useful information on the accounting impact owning a commercial property can have.