Investing in real estate is something that many Canadians consider. Real estate can provide a steady source of income and can really pay off in the long run. The question that many Canadians ask before investing in real estate is, residential or commercial? There are many advantages and disadvantages to both. Often people choose to invest in residential real estate since most are familiar with how renting out to tenants works. However, there are three reasons why commercial real estate may be a better choice for investment for some people.
Commercial Real Estate Can Be Profitable
One of the main reasons that many buy commercial real estate is that it can be very profitable. Commercial real estate is often composed of office and retail space, but it can also include rental residences. Owners can make a steady stream of income from the tenants of these spaces. The desirability and location of the property plays a big role in how high the rent is. One advantage of a commercial property is that rents can be increased without restrictions. This means that well situated properties can bring in even more income as they become more and more popular. With residential properties, there are often caps on how much rents can be raised.
One of the biggest hassles of residential real estate is finding tenants. Letting a property sit vacant, even for a short amount of time, can put the owner in the red. Commercial properties are less likely to have vacancy issues. With a commercial property, there are multiple spaces that are able to be rented out. Having one space vacant out of a dozen spaces is not going to hurt the owner's bottom line as much as a vacancy would in a residential property.
Tenants Take Care Operating and Maintenance Costs
There are many types of leases available for commercial properties. Many of these leases involve the tenant paying at least a portion of the maintenance and operating costs involved with the property. With a triple-net lease, the tenant pays a base rent, taxes, and operating and maintenance costs. Tenants are also more likely to maintain their spaces in a commercial setting. Retail businesses that are renting will often go to great lengths to keep the building that they are occupying looking great.
Buying commercial real estate has many benefits and is often a better choice than investing in residential real estate. Commercial real estate is profitable, has lower vacancy rates, and often involves tenants picking up a portion of the operating and maintenance costs.