Commercial property or commercial real estate is any real estate for the purpose of commerce or earning, which means that you can set up your own business in a commercial area or you can rent that place. In general terms, commercial property is that which falls between industrial and residential property. This term applies to showrooms, retail shops, warehouses, educational buildings, malls, multiplexes, hotels, restaurants, etc. Buying a commercial property is a nice idea to invest your money. Commercial property has grown in importance with substantial increase in benefits.
Types of Commercial Properties
- IT/Business Parks
- Department Stores
- Shopping Malls
- Amusement Parks
- Educational Institutions
Purpose of a Commercial Property There is always a purpose behind owning a commercial real estate and it can be any of the following:
- For Specific Business Use: A commercial real estate can be used for running specific businesses, like restaurant, bar, store, etc. Buying a property for this purpose will definitely help in the running and establishment of business because there will be no such renting problems and the owner is able to manage his commercial property without any restrictions from owner.
- For Extra Rental Income: Some people buy a commercial property for some extra income. Buying a commercial real estate, like an apartment complex and renting the commercial space can earn extra money for the buyers. In the growing market of real estate, the prices of properties are increasing regularly. The mortgage you are paid by the renters help you build equity in your own property.
- Increasing Equity in the Property: Equity is the value of the owner's share in a property. Buying a large scale commercial property requires huge amount of money, which is burrowed from banks and other financial institutions. As money is paid back the equity of owner in the property increases. Earning from the property helps you to pay back the burrowed money and increases your equity in the property.
Strategical Planning Real estate appreciation is a slow and steady process and there is always a need for strategic planning and implementation prior to buying a commercial property.
- You must determine what you can afford and how much risk you can take. Try to estimate that whether or not the rental rates can support the expenses of the property. You must ensure that your income will be sufficient to pay off the loan payments, taxes, insurance premiums, and repair and maintenance.
- Prior to buying a commercial property you must take into account your ability, skills, and time you will be able to spend on it. If you want to spend a little time then don't buy the properties, which need more time. You must spend some time in the market and the neighborhood to get an idea about the income from other similar commercial real estates.
- You should consult an accountant and structure your investment to meet your tax and investment goals.