Diversification is key when expanding your real estate profile. There are many benefits associated with investing in office space, including higher income potential and more leveraging power. Office spaces are perfect for an investor that wants to take the first step toward investing in commercial real estate. You can start with a small traditional office space or loft, and work your way up to a multiple occupancy building with dozens (even hundreds!) of units.
Here are 3 reasons why investing in office space might be the next right step for your real estate portfolio:
Leases for commercial office space are often much longer than residential leases. Tenants looking for office space are usually looking for a long term commitment to put down roots and establish themselves within the community. This means investors can expect long term rental income and fewer unexpected vacancies.
Not only does investing in office space mean long term leases, but it also means higher income potential. Depending on the location, commercial spaces and offices can generate annual returns anywhere between 6% and 12%. This means investors are pulling in significantly more income per month (and for longer periods of time) than they do when investing in residential real estate. Of course, investing in office space requires more capital upfront, but it can be a smart strategy for someone looking for a long term investment option.
Investors come into every new project focused on two things: risk and profit. They want to know everything there is to know about how much they can make and how much they can lose. If you’re investing in multiple occupancy office spaces, you are working with multiple tenants and multiple streams of income.
With residential properties, there is always a chance that the tenant can break their lease or be late on the rent, which means an instant and significant change in your monthly income. With commercial office spaces, if one tenant breaks the lease or is late, the impact is not as drastic because you still have money coming in from the other tenants. Investing in office space helps you spread out your risk, which is something all investors are looking for.
There are hundreds of rules put in place to protect the residential tenant. Rent control laws, deposit limits, and specific regulations regarding evictions are designed to protect the tenant but can sometimes take a lot of the control out of the hands of the investor or landlord. Commercial investors have more freedom, flexibility, and control over their leases.
In residential properties, investors and landlords are responsible for the maintenance and repair of the property, but commercial tenants tend to take on most of these responsibilities on their own. Who is responsible for what can be laid out clearly in the lease, but commercial properties make it easier for landlords and investors to be more hands-off.
If you’re ready to change things up a bit and expand your portfolio, investing in office space may be your next right step. Commercial real estate can be a passive investment that generates significant returns and helps to reduce risk, maximize your ROI, and diversify your portfolio.
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