Investment in Commercial venture looks very lucrative and tempting but its the most complex form of investment. We strongly recommend expert advice is necessary if you haven’t done it before.
Investing in commercial real estate brings with itself many downsides and challenges as well. On one hand it may seem like a gold mine while on the other hand, it requires witty minded person with a strong business sense. Some of the challenges and downsides of commercial real estate are:
For a commercial real estate investor, the most challenging job is to manage his time with the property. You cannot just buy a property, give it on rent and enjoy the bounties. Unlike residential real estate investors, commercial real estate investors have to deal with multiple tenants. This means handling multiple leases, management issues, maintenance costs and other legal issues involved. All this requires a lot of time and great investment skills.
This post is sponsored by Pemberton Group and wish them success for their upcoming project in downtown Toronto: Time and Space Condos
Bigger initial investment:
Investing in commercial property requires payment of a huge sum at the time of acquiring the property as compared to buying residential units. You need to make huge upfront payment in the form of down payment and , your property may require some fixing to do as well before it can be put out for rentals. Also, you should always keep a provision for sudden maintenance costs. Since, commercial property involves dealing with a number of people; the maintenance costs will be higher than needed for residential property. You might get a surprise call one fine morning from your tenants asking to get the roof repaired. As the owner of the property, you are liable to bear the maintenance costs and ensure all the facilities provided are upto the mark.
A risky venture
Commercial property is always a high risk investment than a residential property. The commercial property is open to public. Anyone can visit the property anytime and this puts the property at high risk for damages.
* Visitors can hit the car in the parking lot or damage the property.
* Someone can paint or spray on the walls of the building.
* Visitors can slip on the ice on the walkway
A commercial property investor has to deal with all sorts of people since he has multiple tenants. Each person has a different mind and dealing with their problems and handling legal issues of the each individual is definitely not an easy task. Who knows who your next tenant might be?
Dealing with commercial property issues is not easy and may require professional help. There are many issues that come with the commercial property and it is best to hire professionals to deal with it. This means extra costs.
Checkout this video for challenges faced while investing.