Question for Commercial Investors?

Question

I have a question for the commercial investors in the forum.  Why is investing in commercial real estate limited to those who are more experienced in investing? Is a million dollar building outside of my reach as a beginning investor who is interested in buying? Why or Why not? Thoughts?

Account Closed · Answer

A couple of reasons.

Commercial tenants tend to be big fish with big lawyers. Or, if you concider a large apartment to be commercial, that many tenants are very difficult to manage. They will eat you alive faster than the big lawyers.

Commercial buildings can have very long vacancies. You have to be able to carry the mortgage while you wait for a new tenant. Also, while it is vacant, it will have to be kept in flawless condition. That's abig expense while no rent is coming in.

Residential has clear landlord tenant laws. Commercial does not. You do not get automatic protection built into the law. The courts will assume that you know what you are doing in commercial and have no sympathy.

Can you start out as a beginner with commercial? Sure. Study enough to know what you are getting into. There are some real advantages with commercial. The big one is that you don;t have to deal with residential tenants. Cimmercial tenants understand business image and tend to keep the building looking nice.

Commercial can be NNN lease, which would be awfully nice to not have to deal with any of that.