5 Reasons Commercial Real Estate Is Different from Residential Real Estate

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If you own residential real estate and are considering branching off into investing in commercial real estate, you should be aware of key differences between the two property types. While you may already own residential property, you must go into commercial investments with a slightly different mindset. As one of the top commercial real estate brokers in Arizona, we’ve compiled a few things you should consider.

Commercial Real Estate is All About Who You Know

With commercial investments, finding the right broker is a critical component in successfully obtaining and managing a property. Commercial real estate professionals develop contacts that help them find investment opportunities and spend hours networking with other professionals, community members, clients, and specialists in related industries. This ensures they know the right people when investors need them the most.

The Segments and Markets in Commercial Real Estate

For those who are looking to invest in commercial properties, it’s important to understand the market. There are several asset types in commercial real estate, including retail, industrial, office, multi-family, medical office, and hotels.

Each segment will vary in terms of supply and demand, yield, and profitability, making it important to cater to a sector that performs consistently well and offers the greatest opportunities in today’s economy. If you’re looking to make the jump from residential to commercial property investment, you may consider industrial, multi-family, and land assets. In Phoenix, Arizona these sectors are currently performing extremely well.

Greater Emphasis on Documentation and Income Data

According to Forbes, in commercial real estate, documentation demonstrating income and revenue is critical to selling or buying a property. Precise record-keeping is essential in the industry and will help ensure you have the maximum opportunity for successful investing Investors will want to focus on several areas when examining a potential purchase, including:

  •     Tenant Information
  •     Financial Information
  •     Operating Information
  •     Building information

Commercial Investment Requires a Synergized Team of Experts

Typically, when investing in residential real estate, you’ll be working with one or two agents. However, in commercial property investments, you’re working with a team of specialists. Brokers, lenders, and underwriters will work together to sell or buy commercial properties. If you’re just starting, it’s beneficial to partner with a team that knows the ins-and-outs of the industry.

Rent and Tenant Responsibilities are Different in Commercial Real Estate

Most commercial investments are based on rents that are calculated annually. In commercial real estate, it’s common for property owners to charge a price per square foot. Comparatively, residential real estate is mainly marked by a set monthly rent or mortgage.

One leasing method that is extremely valuable for commercial investors is triple net leasing. With a triple net lease, the property owner will not have to pay property expenses. Instead, the lessee will handle all expenses directly, such as utilities, taxes, and maintenance, and the property owner only has to cover the mortgage.

Plaza Companies’ Brokers are in Commercial Real Estate Investment

With almost 40 years of experience in development, acquisition, management, and leasing, Plaza Companies knows a great deal about real estate investment. Our team of professionals is equipped with the knowledge and dedication to supplying quality services that benefit your commercial investment. And we have a wide range of commercial real estate in our portfolio that meets the needs of every commercial business. We deal with everything from medical office space to mixed-use developments. Contact us today and learn what a partnership with Plaza Companies can mean for you.

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Whether you are looking to us for management, leasing or development services, we can help you find the perfect space. With almost 40 years of experience, you can trust Plaza Companies to assist you with your real estate needs.

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