Commercial mortgage borrowing and lending are expected to grow by 26% in 2024, which shows that there are plenty of opportunities for investors in the U.S.
Laying out opportunities and considerations for commercial property investments will help you make an informed decision before dipping into your funds. But if you've never dipped your toes in the commercial property market, you likely won't know what to expect.
If this sounds like your situation, you've come to the right place. Here's everything you need to know about investing in commercial properties.
Opportunities
Before you invest in commercial real estate, it's important to know the potential opportunities.
A major one is that commercial properties have a higher level of return on investment compared to residential units because of longer lease terms. There's also the potential for multiple tenants to share one property, whether it's an office or industrial unit.
Another reason to invest in the commercial property market is the steady income investors can enjoy. As lease lasts for around five years, landlords get peace of mind, especially as most agreements have clauses tied to inflation.
Everyone in commercial property development knows that there's huge potential for capital appreciation. Thanks to economic growth and demand, investors will see significant returns if they sell or refinance their commercial properties.
Additionally, investing in commercial properties helps diversify your portfolio. Unlike stocks and shares, commercial properties aren't associated with the stock market, which is invaluable as markets can be volatile.
Considerations
While it's tempting to start brainstorming property investment strategies, like with any business venture, you must stay level-headed.
First, research the current market to see what others are paying for similar commercial properties. You don't want to overpay for a property or invest in a unit that won't get filled. To avoid any issues, compare what other investors are paying for similar units in the area, and you'll get an idea of how much to charge.
Investors must take into account property maintenance costs. As with residential units, investors should set a chunk of their profits aside for property maintenance and repairs. Prioritizing tenant management shows occupants that you appreciate their business and it reduces the risk of vacancy rates, which is every investor's worst nightmare.
Once you've found an ideal unit, research the regulatory considerations. For instance, you may need planning permission before renovating or will discover a change in taxes that you must declare.
Which Commercial Property Investments Will You Choose?
Now that you know the opportunities and considerations about commercial property investments, it's time to find one that suits your needs. Make sure you're familiar with all aspects of the business so there are no surprises later on.
At PMI Smart Choice, our team will guide investors through the process and help investors make smart financial decisions. Located in the Vienna, VA, area, we will protect your property and handle daily tasks so you don't have to.
If you're interested, we'd love to hear from you. Contact us here to chat with a member of our team.
