Having a commercial investment property is very profitable these days. The trend is now toward more secured investment, and this trend has been steadily increasing. Why would one consider commercial property investments West? There are varied reasons and these are usually based on cost-benefit analyses over other investments.
Residential versus Commercial Investments
During the 70’s and 80’s, owning residential property investments grew enormously because of the need of the people to own houses and live comfortably in their respective homes. Housing is a basic commodity. However, today people are investing in commercial real estate more for speculative reasons than they used to. There is a growing trend of having a portfolio of commercial investment properties, as the earnings are usually higher.
Just as with the plummeting values of the residential properties in the Western United States, the commercial properties values in the West have followed suit. As can be seen on the following chart of commercial property prices on Southern California from Years 200 – 2010 (Moody’s September 2010 Report), all four commercial property investment areas have been in decline since the second quarter of 2006.
Both industrial and retail prices in Southern California has declined in prices as reflected in the 2nd Quarter 2010, dropping 7.9% and 15.0%. With the historical low financing interest now available, this may be one of the best times to consider property investments in the Western U.S., such as in California and Arizona. These are some of the same areas that enjoyed considerable appreciation in property values before 2006.
Long-term versus Short-term Contracts
Leasing is one of the other reasons why people are investing in commercial property. It will give you a more secured investment because tenants of commercial properties are usually entering into long term contracts, such as 10 years or more. While on the other hand, the residential occupants will usually sign contracts for less than 3 years. Vacancy is imminent in real estate marketing. There is a room for loss of income every time there is a turnover of tenants.
Who Pays for Mantenance on Commercial Contracts?
On the repairs and maintenance of the property, commercial investment property contracts usually stipulate that these costs be borne by the commercial property lessees, while for residential properties, these costs are paid by the landlords or owners of the properties. The point here is you will be earning while others will have to take care of your commercial property.
How do we know that if we invest in commercial property, it would give us a high yield or at least a good return? Choosing the right place at the right time, as the old adage says, is still one of the best policies in investing in commercial property. You have to consider your prospective tenants. Would you go for office space renters in commercial areas or would you prefer industrial businesses to occupy your commercial investment properties?
Timing is Critical with any Investment
The correct timing of property investment, just as with stock or Forex investing, can be learned by studying how the industry currently works. Which sector of the business society needs more lease space at this time? Do any growing industries need more space? These are some of the factors that you can ponder before finalizing your decisions. Read current newspapers or surf the Internet for information.
There is an increasing trend to join Europe’s commercial property investments market. In particular, the UK commercial property investment values are skyrocketing because of the growing foreign investors in UK. Property in Spain, Bulgaria property and property Cyprus investments are hot right now. Many foreign investment firms have added office establishments in London, Madrid and other countries to profit from the burgeoning global retirement community and the alure of the European lifestyle for those with money – money to invest in commercial ventures. Of course, the land values around the areas correspondingly increase in value as the demand for commercial properties increases. You may want to consider investing in highly urbanized areas, such as London and Madrid. Although it requires greater capital, you can also expect higher returns as the demand for properties appears to be in an upward direction.
Buy Your Own Lot and Build
Lastly, although commercial property investing is profitable today, you may consider also buying a lot, and then designing and constructing your own commercial building – if you have the funds. This can grow into a large enterprise and possibly make you a real estate mogul. You can also go for a lesser obligation, buy commercial investment property for sale and release yourself from the burdens of having to supervise construction. Either way, potential to earn big bucks is under your wing.
There are a few companies specializing in international commercial investments that you should consider – one is ICI Group. These properties require complex financing arrangements at times, so your due diligence is critical prior to committing funds.