The Pros and Cons of Investing in Commercial Real Estate in Penticton
Any property you purchase whether it is residential or commercial is subject to pros and cons when it comes to building up your investment portfolio. While real estate of any kind is generally considered a good investment, commercial real estate can yield a higher reward in a shorter amount of time especially if you are a multi-unit owner as opposed to being an investor in a rented single family home.
Let’s explore some of the pros and cons to investing in commercial real estate in Penticton and see if it’s the right path for expanding or adding to your real estate investment portfolio.
What types of Penticton properties are considered commercial real estate?
This is a great place to start, especially if you are new to the Penticton commercial real estate market. Commercial real estate agents in Penticton often work with investors and business owners who own, lease or rent out the following types of property in Penticton and the south Okanagan:
- Mixed use buildings (blend of retail, office and residential)
- Warehouses (storage, delivery)
- Office buildings (professional, medical, other)
- Retail buildings (strip malls)
- Industrial buildings (factories, plants, manufacturing)
- Apartment/Condo buildings (residential)
Pros to investing in a commercial real estate building in Penticton
We are going to use a strip mall or retail building as an example to point out some great benefits to buying this type of Penticton commercial real estate for sale:
Sheer earning potential is the most common reason to make the switch to investing in commercial real estate over residential real estate. The annual return on commercial real estate is generally much higher than the return on a residential property and investors can see a return on their investment in the double digits as opposed to the single digits for residential. Outlooks on commercial property continue to look strong for 2018.
Normal Hours of Operation:
If you like your privacy and value your time then an investment into commercial real estate might be right for you. An investment into a retail strip mall or building will ensure that your hours are congruent with theirs. Once the last business has locked up and gone home for the day you can pretty much be guaranteed that your phone will cease ringing. Most tenants will also require an alarm system to satisfy their insurance requirements, so even a break in or vandalism won’t bother you after hours.
Business to Business Relationships:
Commercial business owners are often times corporations or entities making it much easier and pleasant to deal with day to day business dealings. Small business owners also have a vested interest in protecting their brand and business, so they will go out of their way to keep business communications professional as well as keep their spaces maintained.
Other pros to investing in commercial real estate in Penticton are objective price evaluations, triple net leases, and flexible lease terms. I would love to sit down and answer any questions you have about these or other pro tips for investing in commercial real estate in Penticton.
Cons to investing in a commercial real estate building in Penticton:
To every positive there can also be a negative, and when making a large scale investment decision it is wise to consider both sides in order to be prepared. Let’s examine some of the cons to investing in commercial real estate:
Generally investment into a commercial venture will require more up front capital expenditure than a typical residential acquisition. You should also keep in mind that the expenditures on a commercial property for maintenance alone will be much larger than those on a residential property, for example, a leaky roof will cost much more to repair on a commercial space just due to the square footage alone. You will also have ongoing maintenance costs to consider such as snow removal, garbage pick up and common area cleaning services to consider.
Owning a commercial building infers that you will have more than one tenant, which automatically qualifies you for dealing with more in the sense of day to day operations. You will be required to handle multiple leases, safety and site concerns, maintenance, parking and more. Whether you have a professional team assembled to help you or you do it on your own there will be some time commitment on your part to ensure that you have happy tenants and are a good commercial landlord.
If you don’t like controversy and prefer to live life free from conflict then you may want to consider another investment vein. Commercial buildings like a retail strip mall will attract customers and with customers come traffic, accidents, slips, spills and vandalism. Most of which will land across your desk at one point or another. Having good legal counsel and maintenance crew on your side can eliminate a lot of these issues from arising, but be prepared for these events taking place regularly.
I hope this helps to give you some insight into a few of the pros and cons to investing in commercial real estate. If you would like to learn more about what types of commercial properties are available in the city of Penticton and south Okanagan please get in touch with me, so we can discuss your future investment goals.
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