Many investors never consider the benefits of adding commercial properties to their portfolio. When you find the right property, the rewards can be astounding! In our latest post, we will help you learn how to benefit from commercial property investment in Detroit!
While many real estate investors begin with residential property investments, you can potentially make a great fortune by investing in commercial property. Once you make the leap, you will find there are many benefits as well as other things to be aware of. Keep reading to learn more!
Excellent Profit Potential
When you own the right building, in the right place, you can see excellent returns on your investment. Consider the location and the features of the building. If a salon or restaurant wanted to move in, how much would they need to spend to move-in? Most renovations will be left to the tenants themselves, which encourages loyalty to the location.
Potential For Better, Long-Term Tenants
Consider the types of businesses that would do well in the prospective location. Once you secure these kinds of tenants, you will likely see little turnover. Make sure you research the businesses who want to move in and try to find tenants who you think will be in business for a while. Most of the time, commercial rental can command longer lease terms as opposed to a residential. Many leases are negotiated anywhere from 2-5 years.
Your tenants will be doing business from the location ou own. As long as they have customers and clients coming to visit their place of business, they will want to take pride in the condition and how things look. This isn’t always the case with residential rentals. Overall, commercial renters tend to take great pride in their place of business!
When you have many tenants in one building, commercial or residential, you will tend to see lower maintenance costs. For example, redoing the roof will impact many tenants and sources of income as opposed to just one single-family tenant. You can re-do the bathroom that your commercial tenants share, thusly increasing rents down the road. With a single-family property, your improvements and upgrades only affect one income stream. Overall, you are likely to have fewer tenant issues.
Many investors are choosing to purchase commercial properties via crowdfunding methods. By pooling your investment capital, you will be able to afford larger properties, commercial developments, apartment building and more. Having the ability to invest in such lucrative properties can help to quickly build your portfolio without a massive investment.
What To Watch Out For
As with any investment, there are things you need to watch out for when making a commercial property purchase in Detroit. Consider this…
- Your liability – what will happen if someone sues a business renting from you? There is likely going to be a lawsuit headed your way as well. Make sure you have a strong insurance policy and that you limit your liability in cases of tenant negligence.
- Building maintenance – your costs will be different than with a single-family or residential investment. You will need to consider things such as security, lighting, and landscaping. Will you be able to handle the maintenance yourself, or will you need to enlist the services of a property management company?
- Utility costs – What portion of the utilities will be paid by the tenant? Will each unit have its own meters? If you include water or electric with your tenant’s monthly rent, keep in mind your expenses could go up dramatically if a tenant such as a salon or a restaurant were to move in.