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New York Real Estate

Why invest in commercial real estate?

On Behalf of | Sep 27, 2021 | Commercial Real Estate

Commercial real estate in New York gives you the chance to diversify your portfolio’s assets. Real estate is an asset that your estate can organize for-profit now and then give as an inheritance later on. As for types of real estate, residential properties deal with dwellings like single-family homes while commercial spaces give you more options via office spaces, restaurants, or apartment complexes.

Properties that exist solely for the purpose of doing business are zoned as commercial. When tenants use a space to earn income, they’re working in a commercial zone. Here are some reasons why investors choose commercial properties over residential ones.

Longer growth cycles

Commercial properties give you longer profit cycles to earn revenue within. The values and sizes of commercial structures make their long-term investments, and the growth cycles of the spaces are also longer due to the tenants. Commercial spaces have a higher potential to maintain paying tenants than residential properties do.

Bigger ROIs

The profit margins of commercial real estate tend to be wider than residential properties. The expected growth that commercial properties experience each year ranges between 6% and 12% in value. The expected growth of the residential property is profitable but sits between 1% and 4%.

Flexible contracts

Among the facets that make commercial real estate attractive to investors is the freedom to draft flexible contracts. Every investment has a liability to account for, so leases for commercial properties can be customized to account for the unique risks you face.

Keep in mind that the cost of taxes, insurance, and upkeep will reduce your profit margin. Through a triple net lease, however, the tenants of your property are responsible for property taxes, insurance, and maintenance. You can collect these along with monthly rent.

There are many factors to consider when investing in a commercial property. You’ll want to be well informed when you purchase a commercial space as well as when you draw up contracts with the tenants.