How to invest in commercial real estate like a tycoon?

Residential real estate investing is different to commercial real estate because of the expectations laid out by the tenant authority of the area you are investing in. These rules are there to protect the tenant from unscrupulous land lords who cut every corner imaginable and expect to get rent for poor standard buildings. 

These rules however are far more flexible in the commercial side and a lot more fun for the owner. Let’s compare shall we: 

• You can place in the commercial contract (which is normally 2 to 10 years) that the tenant pays all your costs; water, electricity, taxes, rates. 

• You can demand close to three months upfront and request the tenant to pay the outstanding lease if the want to cancel early. 

• Your commercial tenant will keep the place neat because they need the business and they will willingly renovate the building before they move in. 

• The tenant will be very autonomous and will get security and insurance for the premises while you sit at home cashing in your checks every month. 

• The commercial tenant does know how important it is to pay the rent lest they loose the business and the address. Moving to a new location will cost them dearly. 

Residential land lords can only dream of the above benefits and if they try to include all of them in a contract they will risk serious legal battles.

How do you acquire commercial real estate? First you need to have about 20 to 50% deposit. Why? Banks feel such property is difficult to auction off for the full purchase price especially if the tenant left or there was a problem. 

If you have such an amount you need to carefully consider the location of your property far more carefully than the residential areas. In residential you can blindly blunder along but in the commercial side you need to be very precise. 

You need to asses the local area’s rent per square meter and the return on investment while keeping in mind the current and future prime lending rate fluctuations. 

You also need to have a great commercial property broker who is interested in giving you great service and a property manager who will run it well for you. You do not want to manage the nitty gritty of property on your own, it can get expensive and can remain vacant for some time.