Commercial Real Estate Rundown – 4 Things You Need To Know Before Investing For The First Time

It takes hard work, patience and courage to save for a real estate deposit,  so you should feel proud for reaching this momentous milestone of adulthood. Once you make the decision to explore a commercial real estate investment option, it’s important that you do all your due diligence, checks, and consultations before signing any contracts. To help you get started, here are four things you should know before making your first property investment.

1. You don’t need to be an expert investor to consider commercial real estate

It’s a common misconception that only seasoned investors or very wealthy individuals buy commercial properties, but this simply isn’t true. If you have the capital and are interested in attaining long-term real estate income, thencommercial real estate in Melbourne may be worth exploring as an option for you. 

Like any investment, there is a level of risk and complexity associated, and commercial tenancies have their own set of challenges that differ from residential. Having the support of experts is invaluable in managing a commercial property portfolio. So, make a point of finding a well-respected property investment advisor you know you can trust.  

2. The risks are not as high as you might think

Interestingly, the conversation aboutrisk in commercial real estate seems to sway towards both extremes. Some people will warn you against investing in a commercial property, believing the risk levels are astronomically high; while others believe the long rental contracts make it much safer than other investments. 

The truth is, both views are exaggerated, and the level of risk you face will differ depending on the nature of the commercial property in which you invest. Commercial real estate can be very lucrative as the rents tend to be higher, especially for properties closer to the CBD. The trade-off is that a minor error of judgement or any mismanagement can end up costing you a fortune.   

3. Leases terms are significantly longer than residential ones

In commercial real estate, lease terms are typically long, often extending for five years or more. A 10-year term, with the option to extend for another five years, is a common condition. Such long lease terms can mean security, comfort, and consistent income for the investor. 

The flip side is it can be a significant challenge to find a suitable tenant. More often than not, it takes long periods of time to find commercial tenants. Be prepared for high expenses in this period. As the owner of an unleased property, you will pay all the outgoings that a tenant normally pays in addition to the mortgage and fees.

4. You should consult with experts

It cannot be stressed enough that the complexities of commercial real estate can leave you in some pretty difficult circumstances when mismanaged. In addition to dealing with generally higher sums of money, there are various unique costs associated with commercial properties that you need to keep on top of. 

Things like financing and regulations for commercial property also differ in many ways from residential properties. While hiring aproperty investment advisor and a property manager can initially seem like excessive spending, it will pay you back exponentially in peace of mind and the avoidance of expensive mistakes.

If you are still interested in investing now that you have a better understanding of what to expect, it’s time to book yourself in for a chat with a commercial real estate agent to learn more. Happy investing!

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