Owning Commercial Rental Property

Commercial real estate means any property that is used for commercial activities like stores, shopping malls, offices, hotels and restaurants, storing facilities, etc. In other words it can be said that this type of property has been zoned by the authorities for commercial activities including industrial purposes. Investing in property for commercial uses is very much different from those for residential uses in terms of calculating the returns. And if the investment is in multi-tenant property like one housing number of offices or retail then the evaluation of such property gets really difficult. It is better to engage an expert to do the calculations if you think of investing in one.

There are mainly three different types of commercial real estate to choose from. They are categorized on the use they are put to. So there are retail property which houses the shopping centers and stores, the office properties that, as the name suggests houses various types of offices, and industrial property that includes factories, warehouses, workshops, distribution centers, etc. the other establishments that are housed in commercial properties include restaurants, parking facilities, petrol stations, etc. Some properties houses more than one of the facilities and can be called composite properties. It must be noted that these properties are here to do business and the facilities should be such that they can do their business peacefully and with satisfaction. So to generate a steady income it must be made sure that the tenants find the property good for business.

Investing in commercial real estate has quite a number of advantages over investing in properties having residential use. The greatest advantage is having a tenant for a longer period of time. The residential leases are of short duration of six to twelve months while the commercial leases generally are not below the term of three years. This is because most of the commercial institutions grow a large client base and any relocation can disrupt this advantage. This ensures that the owner gets revenues for a secured period of time. In case of residential properties the rent can fall as it is a matter of negotiation. But in case of commercial properties, an agreement of lease contains terms of rent review and specifically mentions that the rent should never be less than the rent last paid. This ensures that the income never falls.

A very important part of managing commercial real estate is managing the facilities like fire protection, security and air conditioning. These are the essential facilities that are to be provided by the owner but are usually paid for by the tenants. They pay for the increase in the cost of such facilities but the maintenance is the responsibility of the owner. It must be remembered that these places are visited by a number of people and in order to take care of these people these facilities are needed. Any failure can lead to prosecution not by the tenants but by the authorities. The result can be complete ruin. So it is important that these matters are never overlooked.

Finally, the question is of buying the property. The most appropriate way is to buy a commercial real estate through an agent. All you need is to look for a qualified property dealer who can manage a deal in your favor. You should be in control of the property as soon as you own it and this must be ensured for making your investment a safe one.