3 Compelling Reasons to Switch From Residential to Commercial

When you’re long term thinking you start to see real estate as the safest place to put your money.

How many people spend their lives putting money into super and when it comes to retirement they’ve got hardly enough to live on because of inflation, market fluctuations and below average returns coming from a poorly managed super fund?

Luckily we’re not in America where some retirement funds have dried up and vanished completely.

Even if the market crashes, your property is still there and if you’ve chosen the right property, it’s. Still there producing you a return, for life.

Yes, sometimes market fluctuations mean that you might have to drop your rent from time to time to keep it tenanted, but it’s still there, holding some kind of value.

In fact, even if your building falls down, if you’ve chosen the right property, then even the land value alone is worth a goodly amount. Of course, you should be suitably insured so if it does fall down you get compensated appropriately.

This alone is the best reason to start investing in real estate—specifically commercial real estate. Here’s why.

Here are three core reasons to switch from Residential to Commercial real estate.

1. Commercial real estate provides a larger ROI than residential.

As an investor, commercial real estate properties can provide you with a significant amount of extra yearly income, greatly adding to your net worth, and more importantly, an ongoing improvement to your lifestyle.

There’s greater flexibility in financing and leasing a commercial which also gives you greater flexibility in riding the highs and lows of the market when they trickle down and start to affect the property market

2. Some commercial properties virtually guarantee ROI.

Of course, nothing in life is guaranteed, but there are some types of commercial property that are better investments than others, simply due to the nature of the business conducted on the property.

For example, the self-storage industry thrives in every season, and revenue doesn’t usually diminish when the market drops.

In fact when the market drops demand for storage seems to increase. People like to horde their nuts like squirrels but also because when people undergo foreclosure, sell their homes, or downsize to apartments, they need somewhere to store their property.

With self-storage facilities, since the entire building is custom built to accommodate the industry, no matter how many times the business changes hands, it will still be a self-storage facility. The demand for this business is almost always high. And while storage facilities can turn over ownership, they rarely go out of business, making the risk of having a vacant building extremely low.

3. You can increase the value of your commercial property.

Property value for residential properties is determined by a fairly arbitrary process based on the average recent sales of surrounding properties. So even if you’ve completely renovated your home with massive upgrades, tile imported from Italy, a personal Jacuzzi in every bathroom, and walls lined with gold trim, your property will be valued comparatively with the neighbourhood properties.

Commercial real estate takes a more sensible approach to value assessment because while the local comps are still considered, the overall value is based on the amount of revenue generated by the property. Generally speaking, the higher the revenue, the higher the value. This means you can actually stimulate the appreciation of your property by finding ways to increase revenue.

In the end you get twice the bang for your buck because you not only get a better income – you also get more equity.

It takes a different kind of thinking to switch to commercial but once you get the shift in thinking and the shift in knowledge and strategy you can really fly in a way that residential doesn’t really allow for.

Of course like any investment, you’ll want to do your due diligence before jumping into an investment. There are many mistakes you could make while investing in commercial real estate. It’s best to learn how to avoid these mistakes from someone who has decades of experience. Me 🙂

Check out my free online webcast training to find out more about investing in commercial the right way.

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