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For Estate Planning, Estate Administration And Disputes

Investing in commercial property has risks and rewards

On Behalf of | Feb 15, 2019 | Firm News |

Investing in real estate can often help interested parties gain extra income or strengthen their investments. Some New York residents, or individuals investing in property in the state, may start off small with a few residential properties that they fix up and sell or that they choose to rent out for a more steady income stream. However, you may find yourself looking to move up to bigger opportunities, like investing in commercial property.

Certainly, commercial property investments can have a number of benefits, but just like any investment, they also have their risks. Therefore, you may want to consider some common factors that come along with commercial real estate investments before jumping into the deep end.

Time is not on your side, at first

While making residential real estate transactions, your investments and turnover may have gone relatively quickly. When it comes to commercial real estate, however, the process can take much longer. It may take months to complete the necessary processes for purchasing the property, rather than days, and if the property needs work, you may need to invest a substantial amount of time as opposed to the few weeks needed to renovate a small house.

Additionally, if you hope to lease your property to a successful business, it may take you longer to find the right tenant than it would to find someone to occupy a residential space. On the flip side of that aspect, the leases on commercial property typically last longer, which means you may have a steady income for a longer period of time. In the end, the time taken may be well worth the end results.

Remember the risks

As mentioned, any type of investment can come with risks, and you may think you understand real estate risks due to your experience with residential property. In reality, commercial property risks can differ significantly from residential property, so conducting a thorough and accurate risk assessment could save you hardships in the future.

Remember that tenants, even in commercial settings, may default on their leases at some point. Preparing for this possibility could help you avoid serious financial issues.

Have the right help

Understanding the legal aspects of any real estate transaction is vital. You undoubtedly obtained legal counsel when conducting your previous residential real estate transactions, but you need to ensure that any attorney you work with has knowledge and experience with commercial transactions. They differ greatly from residential transactions, and making sure the paperwork is in order is key.