Have you thought about investing in Prince George’s County commercial properties?
If the answer is no, that’s understandable. A lot of real estate investors become comfortable in the residential rental market, and that’s exactly where they stay.
Commercial and residential properties are very different. The way you lease, manage, and maintain those assets will vary depending on the type of property you’re renting out and the tenants you’re working with in those spaces.
We think it’s worth it to consider some commercial investments, especially if you’re looking for ways to grow, diversify, or maximize your existing portfolio. We’ve found that Investing in Prince George’s County commercial properties can mean buying office space, industrial buildings, retail property, and other real estate. There’s no better way to diversify your real estate portfolio and increase your earnings.
If you’ve never invested in commercial real estate before, surround yourself with experts who can help you navigate the process. There’s a lot of potential here, but you have to know how to make smart choices.
Allow us to share some of the best reasons to invest in commercial real estate. If any of this sounds intriguing to you, we hope you’ll contact us so we can help you identify the best opportunities.
Let’s look at why commercial space might be the best thing for you in a Prince George’s County real estate market like the one we have right now.
Commercial Properties Have the Potential to Earn More Rent
One of the first benefits we want to talk about is income.
Every investor looks for properties that will earn them money. You are probably no different – you want something that’s not outrageously expensive. You want something with potential to generate some great rental income in the short term and some fantastic ROI in the long term.
Commercial properties can meet those goals.
There’s a potential to earn higher rental incomes when you’re renting out commercial space instead of residential space. Rental values will vary depending on the size of your space and its functionality. A large industrial warehouse, for example, will be priced differently than a small retail space.
The cost of renting out any commercial space is often higher than the cost of renting a home, however, so you can expect better income. The tenants looking for commercial space will have more capital and they’ll understand that the right space for their business will impact their own financial goals.
Investors who are not earning the cash flow they expect from their residential units often look to commercial investments as a way to generate some reliable income quickly. Your rents are higher and more consistent. There’s a lower vacancy risk and it’s unlikely you’ll have commercial tenants who are willing to fall behind on their rental payments. These tenants are running a business out of your space. They won’t be willing to lose it.
Prince George’s County Commercial Properties Have Lower Vacancy Risks
The risk of vacancy is ever-present when it comes to renting out any property, but with commercial properties in Prince George’s County, there’s less of a chance that you’ll be stuck with unoccupied properties for long periods of time.
Compare what vacancy can do to your income when you’re renting out residential spaces versus your commercial properties. One vacant office in a building that houses 50 offices is not going to impact you as much as losing a tenant in a single-family home or even one of the tenants in your duplex.
There’s also less turnover with commercial properties. Most lease terms are longer and there are high costs associated with breaking a lease early. As an owner, you can count on the rental income for several years instead of just one.
There’s a lot happening economically when it comes to commercial properties in Prince George’s County and throughout the country. Restaurants and bars are up and running again, but they’re also working hard to recover from shutdowns that came with the pandemic. Some have been slow to re-open.
Many of the businesses renting commercial spaces in Prince George’s County found a way to survive during the very worst of the pandemic. With the government support, loans, and the new infrastructure bill that has been passed by Congress, investors are expecting a lot of new development in the area.
Commercial properties will benefit.
There’s not going to be a huge vacancy concern for investors who own commercial buildings. Whether it’s office space, retail shops, restaurants, or industrial – you’re going to have a steady supply of tenants. This is especially true for warehouses. If you’re looking for a great investment opportunity, buy a warehouse. Companies are desperate to fulfill orders and meet the demands of customers. Warehouse space is at a premium.
As with any investment, understanding the market and the local economy is essential when you want to invest in commercial space. Pay attention to what companies are willing to pay for space. The rental rates are rising dramatically, and the vacancy rates are falling. There’s a lot of potential in commercial space, especially now.
Invest in Commercial Property to Diversity your Investment Portfolio
Investing in commercial property is a great way to diversify your existing real estate portfolio. Typically, commercial property represents buildings that house businesses. If you own an entire apartment building, you may consider that commercial property as well. Commercial property has a different set of rules and standards for financing, taxes, and legal requirements.
Commercial property could be a shopping mall, grocery store, office building, or industrial warehouse. It’s different from residential real estate. It provides you with something else to fall back on if the residential market suddenly stalls or you find yourself unable to find good tenants for your rental homes.
Investment costs will be higher than when you buy residential homes. That’s because you may have to make some customizations to your building to accommodate the tenants who will rent the space. However, your returns will more than make up for it. Generally, commercial property makes more money than residential property.
Every investment professional pushes the benefits of diversifying a portfolio. Keeping too many of your assets in a single class is dangerous. Step out of your comfort zone if you’ve been committed to residential investments. There’s a lot more to real estate than that – and you have a lot to gain by exploring the options.
Triple Net Leases are Beneficial for Commercial Investments
If you’ve been investing in residential properties, you likely understand the importance of a lease agreement. Your lease protects you, your property, and your tenant.
With commercial properties, lease agreements work especially hard for you. They’re often more landlord-friendly than residential leases are.
For most commercial investments, you’ll be working with a triple net lease. Why is this a benefit to commercial rental properties?
A triple net lease can require the commercial tenant to pay all real estate taxes, insurance, and maintenance or repair costs associated with the property. That’s in addition to the normal costs, which include rent and utilities. This is not something that’s available to residential owners. Imagine renting out a single-family home in an HOA neighborhood and having your tenant pay the HOA fees as well as the property taxes and insurance costs?
Here’s how a triple net lease can work for Baltimore real estate investors:
- You don’t need to be responsible for scheduling vendors and maintenance work. The tenants in each of your commercial units will do that on their own schedule and according to their own needs.
- Returns are more consistent because your maintenance expenses are not variable. Even with a more passive investment strategy, you’re going to know what’s coming in from month to month, quarter to quarter, and year to year.
- These lease agreements inherently offer less risk to the property owner.
- Management fees are often lower with a lease like this since there’s less hands-on work to be done.
The triple net lease is extremely popular among commercial property investors. While it’s not going to work for every investment property, you do know that you have it as an option, which can leave you a lot of room to negotiate with potential tenants.
Prince George’s County Property Management
Before you invest in commercial properties, do your due diligence and find a professional management company that can help. Whether you’re interested in warehouses or retail spaces, restaurants or industrial lots, doing your homework and understanding the market is critical to establishing a plan for success.
A lot of investors make the mistake of trying to do everything themselves. You don’t have to be an expert on everything. Talk to real estate experts, property managers, accountants, insurance professionals, and mortgage brokers. You need to team up with people who have been doing this for many years. We’ve seen what works and what doesn’t, and we’re prepared to help you invest confidently in commercial real estate.
Please contact us at Stripe Management. We work with owners, investors, and properties in Upper Marlboro, Prince George’s County, Washington, D.C., Capitol Heights, District Heights, Baltimore, and anywhere in the DC metro area.