Why Commercial Real Estate is an Attractive Investment Option

As an alternative to residential property investment, commercial real estate is becoming an increasingly popular choice for investors. Commercial properties typically offer higher yields than their residential counterparts, making them an attractive investment opportunity. 

One of the main advantages of investing in commercial property is the lower management fees. Commercial properties generally have management fees that range from 3% to 5%, significantly lower than the average 7% management fee for residential properties. By minimizing management fees, investors can retain more rental income, thus increasing their overall returns. 

Diversification is another benefit of investing in commercial property. Unlike residential property, commercial real estate encompasses a broad range of property types, from retail and office spaces to warehouses and farmland. As a result, investing in commercial property allows investors to diversify their portfolio, spreading their risk across different sectors of the economy. This investment strategy can reduce the overall risk of the portfolio and potentially lead to increased returns over the long term. 

Commercial leases also typically offer longer lease terms than residential leases, ranging from three to ten years or even more. This provides stability and certainty for investors, as they can rely on a steady cash flow over an extended period. Furthermore, commercial leases often have built-in rent increases, offering the potential for increased income for investors over time. 

Investing in commercial property also provides landlords with low outgoings and tenant-funded improvements. In most cases, commercial tenants are responsible for the property's maintenance, outgoings, and insurance costs, relieving landlords of these expenses. This results in higher returns on investment compared to residential properties, where landlords are typically required to cover such expenses. 

Finally, commercial real estate can be an affordable investment option, with options available in every price range. While some commercial properties can be expensive, a search of commercial property listings will reveal properties for sale in virtually every price bracket. However, it is crucial to verify with your lender as some banks may require a larger deposit for commercial property purchases. 

In conclusion, commercial real estate offers numerous benefits for investors. With its higher yields, lower management fees, diversification opportunities, long leases, low outgoings, and tenant-funded improvements, it is a compelling investment opportunity. Nevertheless, it is essential to undertake thorough research and seek professional advice before making any investment decision. 

Source: https://www.commercialrealestate.com.au/advice/whats-luring-investors-into-the-commercial-market-819366/