5. Less turnover
If you're from the world of residential real estate, this will probably excite you. Unlike apartments and single-family rentals, commercial real estate doesn't typically operate on one-year lease agreements. Instead, most tenants sign three-year agreements at minimum. This reduces turnover (and the hassle and cost associated with it) and also helps ensure stable cash flow for your business.
6. More help maintaining (and improving) your property
With commercial properties, the maintenance, upkeep, and improvements generally aren't all on you. For one, many operate using triple net leases. These put the majority of the property-related expenses on the tenants' shoulders -- things like taxes, insurance, maintenance, and even utilities.
On top of this, most tenants are generally more invested in keeping up the property than your standard residential tenant would be. Since they're a business -- and likely trying to market to clients of their own -- they'll be more dedicated to keeping the building in good repair. They might even make some improvements to the space that increase your property value over time.
7. Fewer problematic tenants
Tired of dealing with residential tenants who just won't pay up or will leave the place in shambles after their lease is up? Sick of tenant disputes and renter complaints? With commercial real estate, things are usually a bit more professional.
Since you're working with business owners -- ones with reputations to protect and dollars on the line -- they're typically more careful in both working with landlords and following the rules. This results in a lot less hassle for the investor/property owner.
8. More off-hours
Don't confuse my words here: CRE takes a lot of work. But the number of hours you're getting calls from tenants or heading up to the property? They're a lot more limited than in the residential world.
In the commercial sector, the majority of your tenants are operating on your typical, 9-to-5 schedule. It typically means more "time off," in the sense you can be away from your phone and not on call for more hours in the day.
9. A more diverse portfolio
If you're already heavily invested in residential real estate, CRE can be a smart way to diversify your portfolio. As 2020 taught us, you never know what's going to happen -- with the economy or in the world. So having your investments spread across different assets is one of the wisest moves you can make in the long run.
10. Good deals may be on the horizon
COVID-19 didn't bring much positive news to the world, but for future CRE investors, there might just be a silver lining. Thanks to increased work-from-home arrangements, as well as the overall economic downturn, interest in some sectors of commercial real estate waned in 2020.
The dip has allowed CRE prices to decline a bit -- at least in some sectors. According to the October 2020 RCA CPPI: U.S. summary report, U.S. commercial real estate prices rose at a 1.4% annual rate from September 2019 to 2020, a noticeable slowdown from the mid-single-digit growth rate in 2018 and 2019. Though prices on apartments and industrial properties actually rose (up 6.7% and 7.4% year over year, respectively), properties in the retail and office building sectors saw prices drop (5.3% and 1.5%). Depending on how long the pandemic stretches out, those prices in weaker sectors could fall even further.
11. It's proven
Finally, CRE is simply a proven, worthwhile investment. Just look at billionaires like Warren Buffett, Stephen Ross, Donald Bren, and of course, President Donald Trump. Tons of mega-wealthy investors have made fortunes in commercial real estate and continue to do so.
Considering commercial real estate investing?
If you do choose to begin investing in CRE, make sure you work with an experienced commercial real estate agent. You should also consult with a local real estate attorney for guidance.
Need more help as a commercial real estate investor? See our recommendations for CRE books, as well as our guide to commercial real estate investing basics now.