High initial investment
If you want a commercial property that will bring in a large return on investment, you will need more capital up front. With commercial real estate, you not only will have to pay more because the property is zoned as commercial, but you may need to invest money into fixing a roof, building a parking lot, and shoring up areas from potential flooding, all on top of the usual permits and licenses you may need to obtain to lease out the property. Depending on the type of business you want leasing your property, the costs could go up. If more people will be on the property the more money you’ll likely have to put into it to make it safe and ready to handle large amounts of foot traffic. Hopefully the property you’re considering (as well as your business plan) shows that the gains will eventually outweigh these costs, and a profit will be made.
If you own many commercial properties and have multiple leases–especially in a strip mall property–you are more likely to be busy managing common use areas, keeping track of costs that tenants owe, and emergency repairs. As a commercial property investor, you have even more on the line than a residential property owner. Not only do you have to worry about your tenants, but you also have to worry about public safety issues. Keeping up on the long list of items to maintain your properties and to keep everyone safe will definitely take up a lot of your time.
Hire professional maintenance and management services
As mentioned above, owning commercial property means fixing emergency repairs, regularly scheduled building maintenance, and replacing larger ticket items. These are for the good of your investment and the safety of all. It takes time and knowledge of maintenance and property management. Sure, you may know how to fix plumbing issues and are excellent at managing multiple properties at once. But chances are that at some point, you will need to hire professionals to install a new furnace, replace a roof, and to help keep everything running smoothly and in a timely manner. This will give you peace of mind and keep your tenants happy. The downside is that it will take money away from your profits. But this is just one of the costs you should expect with commercial real estate. In the long run, you’ll be thankful you maintained your property to keep the value up.
When businesses come in and rent your property, that means many people will come onto the property. This includes everyone from customers to employees–many more than on a residential property. This means an increased liability risk to you as the property owner. Car accidents can occur in your parking lot, people can slip on ice on the sidewalk, and a building may get vandalized. If you’re okay with taking on that kind of risk, then you should be okay taking on a commercial property. If this kind of maintenance stresses you out, then you might want to think twice.