Owning a home is different from owning commercial real estate. A home is an expense you have to keep up as long as you own it. A commercial property is going to generate income. It’s a better investment to own property that generates income. Most homes, on the other hand, are only going to offer you shelter.
Many people buy commercial properties as a place of business. Businesses may or may not be successful. A good commercial property may end up being more profitable than the business, itself.
In commercial real estate either a great location or a reasonable purchase price could make you rich years down the road when you sell it.
As an example, a modest business I know of provided income for a family for 2 generations. Finally there was no one left who wanted to continue the business. The family decided to sell the property after failing to sell the business. It was on a good corner of a main road near downtown. With the business failing, selling the property became much more important. It sold to a banking company for good money even though the business went defunct.
Many older, traditional businesses that have been in a location for a long time have this possibility of making income from selling the location if the business does not sell. This may or may not be true for residential real estate.
In many cases businesses do continue to have ongoing income and marketability in addition to real estate value. It’s the ultimate win to own a viable business in a great location. It’s like doubling your odds of a nice long-term capital gain.
Many entrepreneurs look for business locations where they can also live. While commercial locations may be expensive to purchase, not all types of businesses need the perfect retail locations. Some types of businesses do perfectly well in spite of locations that are less than desirable, a real advantage for many fledgling businesses.
Many businesses may be destinations in and of themselves. Accounting practices, lawyers, and jewelers are some examples. Some businesses may not actually have customers who come to the business location. Mail order businesses or farming operations are only 2 examples.
Some businesses, like retail are very location sensitive. They need to be where people go to shop on a regular basis. Women love to shop for clothing and the right location is part of the experience. A busy grocery could be enough to attract the right customer base, or not. It depends on what you are trying to market.
Some businesses are becoming strictly web based. Their location is totally irrelevant to the success of the business. This new way of marketing may offer you the opportunity to live and work where you want without the constraints of older ways of doing business.
Developers and landlords have different constraints. They need a ready group of renters or buyers and may not do well in remote areas.
Rental apartments may vary according to their target clientale. Lately developers have taken a beating in the failing real estate market, but they are typically chronically short of money. It’s not new. It’s just worse.
Regardless of the way you chose to pursue commercial real estate remember that leverage/indebtedness is not your friend. Your debt load could wreck the income you could realize from a commercial enterprise. It could be similar to the way house flippers got their reality check when housing prices crashed. Too much debt is as bad as paying too much.
One way to make this more successful is to be able to recognize unperceived value in abandoned or underdeveloped property. Donald Trump is pretty good at this, but he’s had his failures, too.
Just because you are not Donald Trump doesn’t mean you cannot succeed. Be open to opportunity and get your finances in good shape before you start your search for the perfect commercial property. If you want to, go for it. You could be the next Donald Trump.