6 Common Misconceptions About Investing in Commercial Real Estate
If you’re looking into investing in commercial real estate, you’re in for a treat. There’s a host of positive benefits in this decision, among them a much greater return on your investment than residential real estate (6-12 % as opposed to 1-4%), longer lease terms in commercial real estate that supply greater stability, and tenants who are much more invested in taking good care of the property. There are also, however, some very common misconceptions about investing in the commercial market. Let’s clear some of them up before you take your next step.
#1: All Available Commercial Real Estate is Advertised
While it is easy to assume that sellers who are looking to unload a commercial real estate property would want it listed anywhere and everywhere,that is not always the case. In fact,only a small portion of available commercial space is advertised to the general public. This is why working with a realtor is so imperative to finding the right space.
#2: Investing in Commercial Real Estate Takes a Lot of Money Up Front
While yes, it is true that you will most likely need to put a down payment on your commercial real estate property, that doesn’t mean you have to be a millionaire to get started. There are hundreds of creative ways to secure the financing necessary to making your investment dreams a reality.
#3: CRE is a Riskier Investment than Residential
Any investment requires a little bit of risk, and commercial real estate is certainly no different. That being said, in many ways, it actually carries lesser risk than residential. For one thing, a commercial lease is much longer than a traditional residential lease. They run anywhere from 3 to 10 years,offering you, the investor, the security of knowing that you won’t need to be searching for a tenant every 12 months. Also, as previously mentioned, CRE offers a much larger return on the initial investment, up to 12%!
#4: Owning Commercial Real Estate is Time-Consuming
Many investors shy away from the commercial real estate market because they have it in their heads that owning a commercial property will take up all of their time. It is true that being a landlord (to any type of property) requires a certain level of diligence, but owning commercial space does not mean that you are married to it. There are a plethora of fully capable property management companies out there where you can happily delegate some of the many tasks that come with being a property owner. This will cut back significantly on the time you have to be present on the property.
#5: The Listing Price is the Absolute Price
If you overlook any of these misconceptions, make sure that this isn’t the one. The price that you are seeing listed is NOT necessarily the price that you are going to pay for the property. Just like residential real estate, commercial real estate has a whole bunch of wiggle room for negotiations. While this is the amount that the seller is asking for, you have the ability to negotiate both the price and the terms of the transaction so that they better suit your individual needs. In other words, don’t overlook a property simply based on the associated price tag.
#6: Any Real Estate Agent Has the Knowledge to Sell Me a Commercial Property
This is where things get a little tricky. While it is true that any real estate agent is technically licensed to help you find any property, residential or commercial, that does not necessarily mean that they have the knowledge base to get you the best deal. Choosing a realtor that specializes in commercial real estate comes with a lot of advantages. For one thing, they have a deeper understanding of your local commercial market, giving them the inside information that will help them to leverage the best deal for you. They will have a much better understanding of what you should be paying, where you should be looking, and where the terms of the deal can be best negotiated on your behalf.
Looking for Commercial Real Estate in Hattiesburg or the Surrounding Areas?
Now that you have a better understanding of some of the common misconceptions about investing in commercial real estate, you can make a more informed decision moving forward. If you’re ready to find the right investment property for you, the experts at SVN| Southgate Realty, LLC should be your next phone call. Our team has spent the past 37 years learning the ins and outs of the local commercial market, and we want to put that knowledge to work for you. Take a look through some of our available properties, and reach out to one of our team members to begin your search. You won’t regret it.