Pros and cons for investing in commerical properties...
 

What are the pros and cons on investing in commercial properties?

For example buying a 900 sqft office unit in a high rise in the downtown area?

I have noticed the value of commercial buildings have not gone up nearly as much as residential.


Any comments?
:)

wrong board lol

a pro would be people arent living in it as they would in a traditional home rental and often keep it presentable so damages when they leave are minimal

Not to mention nightly cleaning services.

Are there a lot of vacant properties surrounding it?

Pro's:

• In most markets commercial values are a derivative of their operating income instead of small investor driven speculation
• Decent commercial properties usually yield about a 10% cash on cash return with 20% down, not counting mortgage pay down and appreciation
• Boring, predictable appreciation
• Easy to finance if leased to stable tenants

Con's:

• Values are interest rate sensitive, because the higher the interest rate, the more money required to cash flow, and thus the lower the value
• Office properties are sensitive to the economy. It is hard to find tenants in bad times. Apartments are less sensitive but more management is required

Make sure you can trust your property manager (if you're getting one). The one we (formerly) used is about to get charged once we piece together what happened to our cash account.
WG

Pros
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Tenants usually sign multi-year leases (in our case all 5 years)
Stable income and usually less of a headache than residential tennants
Tenants pay part of taxes and upkeep of building

Cons
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Usually need 25% down (where I live) to acquire a commercial property
High property taxes
With some tenants they want rennovations done (sometimes at your cost)
Multi-year leases (sometimes hard to break)

I am a big fan of commercial properties personally and own several of them. They are much less of headaches than some of our residential apartment buildings.

DH