Commercial Real Estate

Commercial real estate is considered any real estate property that can generate a continuous income after the initial sale. Properties that are habitual like houses and condos are usually not considered commercial real estate properties. However, when they are invested in for rental purposes they are considered commercial real estate properties.  To keep it simple, commercial real estate is a property in which its sole purpose it to make money. Examples of commercial real estate properties are apartment units, office buildings, retail property, raw land, industrial property, and hotels. Okay, enough of the definitions. Lets look at the advantages and disadvantages of owning a commercial real estate property versus renting one.

Buying a commercial real estate property is supposed to be like putting money in the bank. In fact, most people expect a better return from commercial real estate property than interest made at the bank. However, money in the bank is maintenance-free. There is no work or cost for having money in the bank. On the contrary, the commercial real estate property owner is responsible for all repairs. If the repairs out weigh the money earned from the sale of the property or rent payments, then it was a bad investment.

Some people consider renting a commercial real estate property is like throwing money away. However, it requires very little maintenance on the renters part. So if the property requires major repairs, it does not cost the renter anymore money. But the renter has no control over the speed and efficiency of major repair work. His satisfaction is under the commercial real estates owners control. Also, renters of commercial real estate properties cannot take advantage of tax benefits that the owners enjoy. Though owners have to pay property taxes, it is usually calculated in the monthly rent. So the renter indirectly pays for the property tax. 

When one owns a commercial real estate property one has a sense of community, stability, and security. They are the property owner, the lord of the land. They can get involved with community decisions because the community considers them more of a member than the renter. Commercial real estate owners have something to fall back on during rough financial times. A renter has no equity unless it is in the bank. 

Commercial real estate owners have freedom to do whatever they want to their rental property. If they want to paint it pink, they can. They can redecorate anyway they want or tear down a wall to expand a room. It is their property and they can do whatever they want. A renter has to ask for permission to paint. As for tearing down walls, they better invest in their own commercial real estate property. A renter has no freedom or decision making abilities about the rental property.

Besides lease restrictions, whenever a renter of a commercial real estate property wants to move, they can just pack up and move to another commercial real estate property. They have mobility. On the other hand, a commercial real estate owner cannot just pack up and leave. He has to put the commercial real estate property up for sale, wait for offers, negotiate contracts, and wait for the closing date. However, it is still not that simple. Depending on the commercial real estate market, it could take a long time before the owner receives an acceptable offer.

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