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Range Of Commercial Properties To Put Your Money In
We tend to have the impression that commercial properties are what major real estate players dabble with. And that is not an exaggeration of any kind. There are more regulations to adhere to and the face of the most famous streets are always made up of commercial real estate instead of residential homes. Why? Maybe because they are generally more valuable.
When we go commercial, it is implied that the premises will be used in some commercial way that will be eventually used by profit-driven enterprises or non-profit organisations. Either way, you can expect the tenants to be sucking in huge cash flow unless their business plans are doomed from the start. The irony is that most investors who are taking the first step into commercial properties often are only able to see the obvious types like offices, retail shops or industrial warehouses. There are actually plenty more categories that you should write on your list for consideration. Here is a list of them.
Recreation. Badminton courts, billiard parlours, community clubs, bowling alleys, theatres, etc.
Religious structures. Churches, temples, mosques, cathedrals, etc.
Educational. Public and private schools.
Hospitals and nursing homes. While public hospitals are likely to be built on state land, private hospitals often stand on private land with shareholder interest as a focus. Old folk’s homes and nursing homes are also targets for opportunistic buyers.
Hotels. You are not going to build a 1000-room hotel smack in the middle of the city. But there are many small hotel chains and motels that are often scattered on the outskirts of urban cities. These are prime targets. If you can pull in an experienced marketer to pull in the guests, you are looking at a cash cow that will not stop pumping money into your money bag.
Food centres. As it becomes more and more cheaper to create fancy presentation for food, more food centres with multiple different stalls are propping up all over the place. Everyone has to eat. And food centres in high traffic locations have become the ultimate currency press. The drawback is that managing various business-minded tenants in one place can be a challenging affair.
Car parks. There is nothing a motorist can do but park in your car park when parking lots are scarce in a particular area. You can charge as high as you want and they have to pay accordingly. It’s just like gasoline. When you drive, you have to pump petrol into your tank no matter how high fuel prices are climbing. Anyway, if you can afford a car, fuel prices and parking charges are small money.
Retail shops. Unless you are buying a prime space in a major shopping mall, you should take serious consideration on investing in one. Because when a mall turns out to be a failure, tenants pull out every rabbit out of their hats to defer payments or even not pay at all. They will then blame their failure on factors that nobody can control, including you. If your ultimate goal is to rent to a big player like a bank or a luxury brand, remember that your acquisition objective is to acquire location that these players will find attractive. You won’t find GUCCI renting space from you if all you have is a neighbourhood space.
Other types of commercial properties. Utility buildings, land suitable for farming, locations approved for gas stations, opportunities in public buildings owned by government agencies, professional offices, etc.
The biggest difference between landlording for residential and commercial real estate is the tenants. For the latter, you will now be dealing with shrewd business people who will either squeeze you for everything you are worth or behave like a capitalist whose sole focus is on generating more revenue instead clamping down on all costs. If managing a relationship with them seem like a daunting task that will faze you, stick to residential sites for better sleep at night.