Market volatility and economic challenges often lead individuals to search for more stable investments. Often, these individuals begin by investing in residential properties, but there are benefits to commercial real estate investing that you may not experience in residential markets. These are some things you should know about this investment strategy.

Benefits of Commercial Property Investments

Although commercial leasing is more complicated than residential rentals, the benefits are significant. For example, commercial tenants approach their expenses with a financial and business mindset. They often have significant experience in this type of lease. In addition, they have a network, such as realtors and attorneys, to help them along.

In addition, commercial tenants tend to stay put unless they require additional space. They like to ensure that their customers know where to find them, especially if they have retail or office spaces. Therefore, you can work with long-term tenants.

Finally, your commercial property tenants often pay for any renovations or repairs your property may need. They keep up on maintenance and keep your property in great condition because they don’t want their customers to get a bad impression of their companies.

Factors That Affect Rental Income

Like residential leasing, there are several factors that could affect your rental income on commercial properties. First, the type of business, whether it is retail, warehousing, manufacturing, or other commercial property, can have an impact. This is especially true for seasonal businesses, which may pay you higher rental payments during their busy seasons and reduce their payments during slow seasons. Your tenant’s revenues play a key role in the amount of money you can collect.

Also, the economy can impact your rental income. During economic downturns, your tenants may not be making as much money, and if you want to keep them, you may have to reduce the amount of rent you charge. However, in economic upturns, you can often raise the rent on new leases.

Calculating Rent

There are several ways that you can calculate the rent on a commercial property. First, you can charge a percentage of the company’s revenues or gross income. This rental agreement often also includes a flat rate. For example, you may charge a retailer $1500 per month plus two percent of the tenant’s gross sales. You may be able to increase this amount based on location. You may also choose to charge your base amount and a percentage of sales over a specified amount, such as five percent of revenues over $25,000. You may also charge a specific amount per square foot.

If you are looking for new investment strategies, learn about commercial real estate investing strategies and how they can help you increase your bottom line. Contact Lending Hub today to get the financing you need for your next investment property.