The residential real estate market has long been a popular choice for savvy investors looking to make capital gains when other markets are too volatile. But in recent years, there have been many investors who have dipped their toes in the commercial real estate market in Houston and discovered it is just right for them. If you are interested in commercial real estate, Bayou Properties can help.
Buying commercial properties offers a number of benefits, which is why it is a billion dollar industry. That is not to say that you must snap up an apartment complex or huge mixed-use building to gain these benefits. On the contrary, smaller investors who just buy one or two individual units do pretty good as well.
Here are just a few reasons why commercial real estate is an investment you should look into.
Diversify Risk
If you own a residential home, or even two or three, there is a chance you could lose rental income in any given month. But if you own commercial real estate with multiple tenants, there is a lower chance you will lose much of your rental income on any given month.
With commercial property, you will likely lose tenants, even two or three at a time, but the hit is smaller and easier to recover. Losing two or three tenants when you only have three houses to rent could be potentially devastating.
Better Returns
Typically, commercial real estate offers better returns compared to residential real estate. If, say, you own several residential homes in the area, you can expect a yield of about 1 to 5 percent. But a commercial property portfolio with run you a yield of around 6 to 12 percent. And if you hang on to that commercial property for a long time, the earning potential is exponentially higher.
Greater Cash Flow
The yield on commercial property is higher both in sense of initial investment basis and per square foot. This holds especially true if you rent or lease commercial property with multiple units. Basically, the more tenants you have, the more money you stand to gain.
And due to the fact that commercial real estate leases are usually longer than residential leases, it is far easier forecasting cash flow year after year.
Banker’s Hours
If you own commercial real estate and your tenants are businesses, you are basically having to deal with them during business hours. That is, it isn’t likely you will be getting a call from one of your tenants at your commercial building having an issue at 10 p.m. on a Saturday night.
If you own residential properties, you could be getting a call at three a.m. on a Sunday morning should the furnace go out or the water heater burst and cause water damage.
Better Relationships
In a legal sense, the relationship between a commercial property owner and their tenants is a business relationship and not a personal relationship. So this often makes the interaction between the two cordial and polite.
When owning residential property, you know and deal with the people renting your house as individuals. While this isn’t all bad, there can be times when things can get heated between two people.
Less Competition
The residential real estate market has a lot of competition and if you don’t jump on opportunities quickly, another investor will get the deal to be sure. There are also better deals to be found in the commercial real estate market. And you don’t have to rush things through, you can take a little time.
If you are interested in commercial real estate, Bayou Properties can help, contact us today.
