Have you thought about a commercial property as your next investment?

Commercial properties are somewhat an unknown territory to most of us. They require larger down payments. Interest rates are higher. Still, they can still be a very lucrative investment opportunity.

If you’re looking to diversify your investment portfolio, are unhappy with recent rent control changes or are tired dealing with ever more powerful residential tenants, think commercial.

Commercial properties do have their drawbacks, I’ll admit that. 

First of all, most of them require a down payment of 35%, which is almost twice as much as the 20% required to purchase a residential investment property. That itself can be a deal breaker, if you don’t have access to those kinds of funds. 

Second, interest rates are, on average, 2% higher than residential mortgages, which certainly cuts into your profits.

Finally, it can take some time to find a good tenant and your unit could sit empty…

Commercial properties can be very profitable, though. I always say that when you’re not dealing with your own money, you spend it easier. Therefore, there is a potential to charge a good rent for a decent commercial space.

Next, while as a residential landlord you are responsible for property taxes and condo fees, in commercial leases this cost is covered by the tenants. Not bad, right?

The leases are also longer, ranging on average anywhere from 3 to 10 years. 

If tenants don’t pay, there is no complicated process of going through Landlord and Tenant Board to kick them out – you simply change the locks and take posession of all the inventory inside.

Finally, there is no rent control. While for 2018 the rent control on residential properties is 1.8%, once your commercial lease is up, you are free to raise it as much as you like.

I am not saying commercial properties is the next thing. It may not be for everyone. We may only hear the good stories, after all. However, with rising residential prices reaching, hopefully, their limits, who is not to say they are not the next thing.

It’s worth checking it out, to say the least.