If you are looking to get started in real estate investing in Denver, you might not initially consider the option of investing in commercial real estate. However, commercial real estate is another option to consider. If you want to consider investing in commercial real estate in Denver…
Capital Requirements Are Different
When you invest in single-family rentals, the properties tend to run at the lower end of the residential market, or under $400,000 for an investment property. However, if you are looking at commercial properties, many of them run about ten times as much, costing millions. This can make it harder to find capital to support your purchase, especially when you’re just starting out.
Profitability Can Be Higher
On the other hand, if you can manage to get the necessary capital to invest in commercial real estate, you might find it more profitable. While residential leases often end up at 1-4% return, commercial leases can often be much higher, perhaps 12% return. Partly this is because you have more units, so that even if some are occasionally vacant, you are less likely to be fully vacant.
Leases Are Longer
Another factor that helps keep your vacancy rate lower is that commercial real estate leases tend to be longer, lasting for several years. This means that when you land a tenant, you can count on that income for longer.
More Professional Connections
One benefit of being in commercial real estate is that you are working with businesses. These businesses have professional relationships with other businesses, which can help you network. Sometimes, you can even utilize these professional connections to get additional benefits, such as discounts on maintenance contracts.
It’s also a more reliable way to access new tenants. Someone’s good business partner is more likely to be a good tenant than someone’s good friend.
Keep Banker’s Hours
One side benefit of owning commercial real estate is that your tenants are only going to be active during business hours. This makes it less likely that you’ll have to wake up and deal with the proverbial clogged toilet at 3am. Instead, you have predictable hours when problems are likely to arise.
Business Is Booming in Denver, Too
Just as residential real estate investment is hot in the Denver market, commercial real estate is doing well. There has been a slight downturn connected to the coronavirus pandemic as some businesses are abandoning their commercial spaces and working remotely. However, it is expected that as widespread vaccination lets people return to business as usual, we will see more gains in commercial real estate as well.