In the prior lesson we helped you consider all of the investing options available to you.

Now we want to focus on WHY Commercial Property is such a great option for many investors.

There are three key reasons we will cover in this short lesson

1. Long Term Tenants

2. Better Cashflow

3. Easier to Finance

In short WHY is commercial property such a great investment? 

This is because of the great cashflow as a product of…

Stable Returns due to long term tenants
And
Tenants Pay the Outgoings which reduces maintenance costs on investor

Long Term Tenants

Commercial leases can last over 10 years in many cases.

Most residential property leases turn over less than every three years.

Commercial tenants are sticky. In many cases they won’t move once they are established.

This is one of the most critical factors that helps generate consistent cashflow with commercial property investments compared to residential.

Better Cashflow

One of the major differences between commercial and residential property is that the tenant pays the outgoings.

In many cases this will double the net yield an investor will see.

For starters this is a very practical basis of comparison for a loan on a commercial property.

This is a very real example of a residential property, which an investor can have in their portfolio.

As nice as it looks, unfortunately the reality is that this residential property has a negative cashflow.

Many residential real estate investors struggle with this real world challenge. Their investment property may have a great capital appreciation, but the cashflow is either negative or very low.

But compare this to the sample property we reference in the video, this highlight from the video below shows just how significant the net cashflow can be with commercial property.

Compare this Net Cashflow from the example in the video to a commercial property below

Because a tenant will sign a long term lease and cover the outgoings the returns are much higher for a commercial property investor than a residential property investor.

Easier to Finance

Another critical factor is that Commercial Property is easier to finance than residential property.

When use a ‘Lease Doc’ loan your loan will be evaluated based on the strength of a tenant and their ability to cover the cost of the loan. This makes scaling a portfolio with commercial property assets highly achievable with the right property selection.

Next Up Lesson 4 Costs of Getting Into Commercial