For California residents who are seeking a dependable and appreciating return on their investments, real estate has long been among the top choices. Investors are more likely to have a positive experience in the commercial real estate market as opposed to the residential market for a variety of reasons, including the nature of commercial versus residential tenants and historical activity in this market.
A critical factor for the aspiring landlord is the return on investment. Commercial real estate can yield greater returns per dollar when the lessee picks up the tab for general maintenance and insurance. Additionally, owners of commercial real estate may enjoy the benefit of secure cash flow over the long term. Tenants may sign longer leases than the residential standard of one year, so less time and money are spent searching for and vetting new tenants.
Landlord responsibilities are another important part of return on investment. Not only do landlords own and pay taxes on the property, but they must respond to tenant needs in a timely fashion. With residential property, this can mean late night calls and emergencies that are atypical for commercial property.
Commercial real estate offers some unique advantages compared to other types of investments, but enjoyment of these comes with the need to exercise diligence in both purchases of property and lease contract negotiations. Potential owners need to understand the market for their future tenants, the possibility of future developments and a full accounting of their costs prior to turning a profit. Surprises along the way, such as title disputes and unforeseen enforcement of liens, must also be avoided to maintain profitability. Experienced legal counsel can help protect the investment and support a positive experience.