Real estate investors in San Mateo who have not yet considered commercial property may be missing out on a huge opportunity. It’s a great way to diversify your investment portfolio. It can also be more lucrative than residential investing, while requiring less work.

Here’s a quick guide on why it works and what you’ll need.

Benefits to Commercial Investing

One of the largest and most expensive headaches for property owners in the residential space is maintenance. You’re constantly being called to respond to routine repairs and emergency situations. You’re competing for the time and resources of your best vendors.

With commercial properties, your tenants are going to take care of all maintenance issues. Owners are still responsible for the infrastructure of the building, but you won’t be called to fix the drywall or clean the carpets or manage leaking toilets.

You can also count on more favorable lease agreements. They are longer and more profitable for the owner. Returns are consistent even with a more passive investment strategy when you own commercial property, and you’re dealing with less risk, typically. You can also count on lower property management fees, especially when you consider the per-unit cost.

Diversifying with Commercial Real Estate Investments

Not putting all your eggs in one basket is good advice.

If you primarily invest in single-family homes or small multi-family buildings, you might want to think bigger in order to grow your portfolio. You’ll increase the cash flow you’re able to earn and you’ll likely reduce your vacancy rate as well.

Commercial property has a different set of rules and standards than residential property for financing, taxes, and legal requirements. If you’re prepared for that, there’s no reason not to invest in shopping malls, office buildings, or warehouses.

Risk and Rewards of Commercial Property

More capital will be needed if you want to invest in a meaningful way in commercial properties. Investment costs will be higher than when you buy residential homes. That’s because you may have to make some customizations to your building to accommodate the tenants who will rent the space. However, your returns will more than make up for it. Generally, commercial property makes more money than residential property.

There’s more risk but there’s also more reward. You can expect a higher cap rate and more appreciation. Longer leases offer stability, and you’ll find you can really build a profitable long term investment strategy around commercial properties when you add them to your portfolio.

If you’ve never invested in commercial properties before, make sure you work closely with a qualified San Mateo property management partner. You’ll need help navigating the process, negotiating the best possible lease terms, and creating a positive and profitable investment experience.

We’d love to be that partner. Contact us at Bayside Management.

Founded in 1982 in Marin County, Bayside Management has expanded to offer full-service San Mateo property management to the entire San Francisco Peninsula. We manage single-family properties, multi-unit complexes, commercial properties, and homeowner associations.