COMMERCIAL INVESTMENT PROS AND CONS
Pros and Cons
Commercial property investment can be very complicated and risky so let us look at the some of the pros and cons of investing in commercial property in nz. Mentioned below are just some of the main advantages and disadvantages of commercial investment.
Advantages of Commercial Property Investment
It has a high-income potential with a cap rate of between 6-12%. The capitalization rate is the measure of capital growth. It is obtained by dividing the rental income by the value of the property then multiply by 100. Example: for a property with a sale price of $600,000 and a capital income of $50,000, the cap rate will be 8.3%.
In most cases, tenants and leases are transferable; this ensures immediate income flow.
Tenants are business owners, who aim to have a great relationship with the landlord which favors their business as well as your interests as the investor
Disadvantages of Commercial Investment
Commercial property investment requires a massive initial capital and expenditures.
It is susceptible to risks such as damages, accidents, etc. due to the traffic of people who visit the premises.
For a newbie in this investment space, you’re likely to waste a lot of time between screening deals and making offers.
You have no right to terminate the lease of tenancy not unless the tenant breaches the contract; only then can the landlord file for contract termination process.
Had to get tenants if the location is not right