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Why is buying commercial property a good idea?

When people invest, it's common to look into real estate. You could own apartment complexes or fix up cheap homes to sell, for instance, which would allow you to make a profit. Commercial real estate is another option you have.

This can be a good way to balance a property portfolio, because businesses always need a location where they can run and operate. There are different laws, rules, and terms to the agreements for commercial real estate, though, so it's important to bring your attorney on board to help you with contracts and other parts of the purchasing process.

Commercial real estate, for a start, is not valued in the same way as residential real estate. Residential properties aren't generally valued based on square footage, although that could be part of the equation. Commercial real estate is, though, so the larger the property is, the more it's likely to cost and be worth.

Commercial properties are also great if you want to diversify and make sure you aren't being too risky with purchases. Here's an example. If you have a residential building that has two tenants, losing one could hurt your income significantly. However, if you purchase a commercial building made for 100 tenants, then losing one tenant won't matter as much.

Commercial real estate is also beneficial because you can lease it out on longer terms. What kind of retail business would get off the ground with only a year of trading? Not many, so a two-year or longer term may help you bring in the income for a longer time, stabilizing your income and the local market.

Source: Entrepreneur.com, "Investing in Commercial Real Estate," Danielle Babb, accessed Oct. 21, 2015

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