Long Island commercial real estate buildings, such as office, industrial and retail properties, are a profitable and worthwhile investment. But, they are the type of purchases that require some thought. If you are in the market for commercial space, it helps to weigh the pros and cons first.
The Pros and Cons of Buying Long Island Commercial Real Estate
Pros
Income Potential
Commercial real estate buildings have a large income potential, especially in Long Island where business is brisk. Depending on the area, commercial properties generally have an annual return of six to 12 percent. This is roughly three times higher than a single-family home’s yearly return on investment.
Buying a building is a good investment, because it brings in a steady stream of income through rent payments. Additionally, triple net leases, which are available for commercial real estate, pass along many of a building’s monthly expenses to its tenants.
Increased Visibility
With Nassau County’s and Suffolk County’s busy roads and vibrant communities, new and revamped buildings are quickly noticed, which can lead to increased sales of products or services.
A commercial real estate purchase also puts its owner more in the public eye. They can use this cache to build professional relationships that will further improve business.
Flexible Lease Terms
Commercial buildings have fewer consumer protection laws that govern its leases when compared with residential real estate. Laws for security deposit limits and termination rules also benefit building owners.
Better Hours
Since commercial properties are generally only open during the day, working hours are more manageable. Aside from the occasional emergency, the owner and their staff enjoy free evenings.
Cons
Larger Initial Investment
Buying Long Island commercial real estate requires a significantly larger investment than leasing office space. Other expenses, like capital improvements and maintenance, can add up quickly as well.
Greater Time Commitment
Commercial building owners assume a lot of responsibility when they buy a property. It requires a commitment of time and effort to keep the building running smoothly. From general upkeep to tenant complaints, building owners juggle multiple responsibilities.
Riskier
Buying commercial real estate can be a risky proposition.
- Owners open themselves up to many liabilities, including accidents to tenants and visitors.
- Since neighborhoods tend to change, the location can backfire over time.
- Commercial real estate is not as easy to sell as residential real estate.
- If it becomes difficult to find tenants, high expenses may cause an owner to experience cash flow problems.
6 Quick Tips for Buying Commercial Real Estate
After weighing the pros and cons, prepare for your purchase with these six steps.
- Do Some Soul Searching
- Educate Yourself
- Analyze the Risks
- Keep Your Options Open
- Assemble a Team
- Prepare a Financing Strategy
Now, the only other thing you may be missing is a qualified Long Island commercial real estate agent.
