Rental Income. The number one reason investing in real estate is the earning potential. Real estate investment generates a return for the investor. Depending on the area, the return range form different asset type and to geography area or neighborhood.
Business relationships. Small business owners generally take pride in their businesses and want to protect their livelihood. Owners of commercial properties are usually not individuals, but LLCs, and operate the property as a business. As such, the landlord and tenant have more of a business-to-business customer relationship, which helps keep interactions professional and courteous.
Tenant maintenance . Depending on the type of property and the lease type, if the tenant operates an business. The tenant is more involve in the property maintenance. For retail business, it is the tenant self interest to keep the property supreme for their consumers. As a result, commercial tenants and property owner interests are aligned, which helps the owner maintain and improve the quality of the property, and ultimately, the value of their investment.
Price appreciation. The real estate value has outplace inflation very well in the past. In some area, the value has increase faster. Due to the population growth, construction limitation and high cost of construction, new buildings can be a limited supply. We continue to expect the real estate value on the increase. The downside is the liquidity when once wants to sale the real estate. Most often not easy to find new buyer, financing option can be limited due to increase banking regulation. And periodically, economic can hit recession, and the real estate market can be on a complete halt.
Lease type/Owner involvement . Unless the investment is in apartment building, tenant typical operate an business. Businesses usually go home at night, the operating hour is limited. Real estate owner shall not hear from business tenant on non-operating hour.
In some case, investor might have triple net leases. The general concept is as a property owner do not have the responsibility of the property expenses. The lessee handles all property expenses directly, including real estate taxes. The only expense you’ll have to pay is your mortgage. Companies like Banks, Retail Shop typically sign these types of leases, as they want to maintain a look and feel in keeping with their brand, so they manage those costs, and you as an investor get to have one of the lowest maintenance income producers for your money. Strip malls have a variety of net leases and triple nets are not usually done with smaller businesses, but these lease types are optimal and you can’t get them with residential properties.
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