Why Commercial Real Estate In Columbus Ohio Is A Wise Investment
Commercial real estate, although often requiring a greater outlay of capital, is often a wise investment in general, and certainly offers a greater rate of return, security and
profitability than real estate investment in single-family homes.
What’s so special about commercial real estate?
For one thing, there is greater stability. If a family leases a home for a year and then decides to vacate and it takes you a month to get a new tenant, you’ve just lost 1/12th of your profitability for the year on that property. On the other hand, if you own a warehouse or a strip mall, first of all, you often have multiple tenants, so that even if one leaves, you have others to support your profitability.
Second, unlike a typical single-family house, many businesses will sign three to five-year leases, which go a long way toward keeping you in the black on your balance sheets.
Next, in overall profitability. Commercial real estate often has an annual return over the purchase price of 6 to 12 percent, depending upon area, compared to a 1 to 4 percent rate of return for single-family real estate.
Another aspect is professional relationships. Owners of commercial property and those who lease the property are both business owners and barring unforeseen circumstances,
they tend to act more professionally with one another, while you never know when private renters will go off the reservation with one another in your home, and destroy property or commit violence in your residence. You are more likely to be dragged into the middle of things with residential real estate.
Businesses that rent or lease your commercial real estate are cognizant over the fact that keeping up the cleanliness and image of their business is essential to attracting customers, so you and they have an aligned interest in keeping the place neat and orderly.
Still another factor in owning commercial real estate is that the vast majority of the businesses you service will go home at nightfall. Except for the occasional break-ins of fire alarms going off, you’ll generally be able to sleep at night without worry.
Another is that commercial real estate often has realistic lease rates. The owner can simply ask to see his client’s books, and set an appropriate lease rate, according to prevailing cap rates for commercial property in the area. With residential real estate, leases are more subject to emotional demand and the whims of the local economy.
Still another, very positive detail, is the idea of triple net leases. While they vary, the idea behind a triple net lease is that the renter and maintains the property and pays the real estate taxes, and for you are responsible only for paying the mortgage.
Another positive in commercial real estate is that unlike residential real estate, there are fewer consumer laws such as how long you have to return a security deposit. As a consequence, those who own commercial real estate often have greater legal flexibility to tailor leases as they see fit.
Investing in Commercial Real Estate in Columbus Ohio
Of course, the title of this article references commercial real estate in Columbus Ohio. Why Columbus? The plain fact is that the vast majority of commercial real estate investors live
with an hours drive of the commercial real estate they invest in. Commercial real estate investment, unless you hire a top-notch lease manager to take care of everything is not a passive income opportunity, so there is no particular reason why an investor living in Los Angeles would plunk down a huge fortune to invest in Columbus as compared to somewhere in the LA Basin.
However, the commercial investors who do really well financially, are those who choose to invest in a growing, balanced economy. Forbes Magazine ranked Columbus as the number 7 best city for young professionals, Business.com rated Columbus as one of the five best cities for entrepreneurs and start-ups, and Ohio is ranked 5th for Fortune 500 companies, with the vast majority being in Columbus, all which means that Columbus is certainly waving the Checkered Flag for commercial investors.
A very balanced economy between defense, health care, insurance, fashion, banking, retail, technology as well as the State Government, means that Columbus will continue growing at a steady rate for many years.
As to which area to invest in, the Motley Fool suggests that not all commercial real estate has the same value. Industrial buildings, warehouses, buildings for manufacturing and refrigeration bring the best value in the commercial market, followed by office buildings and hotels, with retail space and apartments bringing up the bottom.
The Fool recommends coupling with a major real estate company to do a feasibility study to determine precise, market supply and demand in the Columbus area to sniff out, undersupplied commercial opportunities.Another thing to be cautious about is to make sure you have the capital reserves by creating a capital reserve fund to be sure you can cover all contingencies.
Commercial Real Estate is Not Just for the Big Boys Anymore
Another thing to consider, as a new investor, is that commercial real estate is not just for the big boys with big accounts anymore. In 2012, the Federal Government passed the Jumpstart Our Business Startups (JOBS) program. For the first time, people were able to solicit investments outside of stocks and bonds industry.
Known as crowdfunding, for the first time, people were able to pool resources together to purchase real estate, particularly commercial real estate, for as little as $5,000 a share, and sometimes gain a return on investment of up to 14 percent.
Fundamentally then, whether you be a small investor or a multi-millionaire and you live in the Columbus area, you owe it to yourself to look into expanding your investment portfolio into commercial real estate. There are certain tax advantages, the return on investment remains very much outside of the realm of the stock market, and many of the headaches of residential real estate investment are eliminated.