The Pros and Cons of Investing in Commercial Real Estate

Q. I had some successes in real estate investment, now I want to invest in a commercial building, what are the major pros and cons investing in commercial real estate?


A. While most people can quite easily get into residential real estate investment filed, commercial real estate investment is a lot more complicated, its major pros and cons are summarized below:


Pros of Commercial real estate investment

• Higher rent (if you can find a tenant)
• Lease is more favorable to the landlord
• Easier to manage
• Longer lease term
• Commercial loan has no impact on the landlord's credit

Cons of Commercial real estate investment

• It might take longer time to find a tenant, especially if the local economy is in the downturn.
• More complicated lease (gross lease, triple net, double net, modified gross, etc.)
• Commercial financing is hard to obtain.  Commercial loans typically are 5-year fixed with balloon payment, so you have to refinance every 5 years.