When you’re buying a residential property, you have to have a good idea of what the sales and rental market are like. You have to have a good idea of how much each home will cost, what it’ll take to repair the place, and then the total value when all the renovations are completed. Unfortunately, it isn’t quite that easy if you have a commercial property. It’s a lot more complicated than that, and there are some huge factors that can contribute to the appeal of your commercial property if you want to sell.
Here are five reasons why you might want to reconsider purchasing a commercial property.
1. Commercial property isn’t easy to understand.
With a commercial property, you have all of the things to worry about that you would agree with a residential property and then some. Some other things that you have to factor in with a commercial property are how reliable is the tenant, the sort of business they run, and whether or not that business is conducive to your property. Also, the types of businesses around you will affect your rent, thanks to contractual agreements.
2. Commercial property can be greatly affected by economic conditions.
While residential properties will feel the effect of a shaky economic situation. People who once had a business office may decide to operate their business from their home to save money, especially when the market is less than favorable. Even still, people may choose to work out of their home when the national market is going well, simply because their local market is suffering.
3. Commercial property is difficult to place a value on.
Unlike residential properties, a commercial property owner can’t use thecomparable property to set its rent. There are some different factors that will affect the overall value of the property. Not only that, but commercial property owners have a hard time finding properties that have recently been rented out to the same target audience. Some property owners base their rent per square meter, which is something that works for shopping centers and the like.
4.It takes longer to find tenants with a commercial property than a residential.
Commercial properties have the luxury of offering long-term leases, sometimes up to ten years. However, once that tenant leaves, it is going to be that much harder to find a new tenant that can use the specific property. On top of that, commercial leases are a lot more complex than a residential lease because there are a lot more options. These options include things like a gross lease, double net, triple net, and even a modified gross.
5. Older commercial properties are a threat to an upgraded or new property in the same town.
People invest in an old commercial property are always on the lookout for new and upgraded properties in the area. Tenants are always looking for new offices with upgraded and modern amenities. Because of this, owners of old commercial properties feel threatened and fear they may lose their tenants.