Are you thinking about investing in commercial real estate? While there are certainly risks involved, the benefits far outweigh them. Investing in commercial real estate in Wilmington, NC in addition to or instead of residential properties provides you with a larger income potential and a more diverse portfolio. Here are a number of other benefits you can take advantage of by investing in these properties.
The Income Potential
Just how much higher is the income potential on commercial properties? On residential properties, your investment is likely to return around 5% after you factor in all of your costs. That’s not a huge amount. With commercial spaces, 5% is the lower end of the scale. In many cases, the right property can bring in 15% or so of income every year. In most cases, downtown office space is more profitable than apartment buildings, but location is a key factor.
There’s Actually Less Risk in Some Ways
With a residential property, if you lose a tenant, you lose the income from that property. With Wilmington, NC commercial real estate, that’s not always the case. These properties often have space for multiple tenants, so the loss of one doesn’t mean you no longer collect any income. In many cases, you can also lease these properties as NNN, which means that the tenants themselves are responsible for more than just their rent. They also pay net taxes and building expenses plus contribute to common area costs.
Property Values Can Appreciate
There are many different investment opportunities out there, but not all of them are equal. For example, stocks offer limited options—you can buy and sell, but that’s basically it. You have little control over the value of the stock. With both residential and commercial properties, however, you can make improvements, leading to an appreciation in value. With residential properties, your options for increase the value are somewhat limited. You can remodel or add on to the home, but that’s about it.
With commercial properties, you can modernize the building, update the interior, add more parking, expand upward and outward, and more. With these changes, you may be able to eventually sell the property for more than you
paid for it.
It’s a Secure Investment
Commercial properties consist of two investments: the land and the improvements upon it (the buildings, landscaping, etc.). If you find that you simply can’t find tenants for the buildings, you can always demolish them and build something new or simply sell the land itself. The need for these properties is also fairly steady and stable. Whether it’s Wilmington, NC, office space, a warehouse, or an apartment complex, you may not have much difficulty in finding tenants.
While location does still play a part in how in-demand the property is, it’s not as much of a make-or-break factor as it can be with residential properties.
These are just a few of the benefits that come with investing in commercial real estate. With less risks in some ways and a larger profit margin, you may want to reconsider only investing in residential areas.