Advantages of Non-Residential Commercial Property

Residential property is a great way to build long term wealth. Commercial residential is a great way to build long term wealth. I think another great way, but often less discussed way is commercial (business occupied) property such as industrial, office, and retail space. All three areas again are wonderful for building wealth. It depends the type of landlord you want to be, your long term goals, as well as your knowledge and access to knowledge in the three areas. A few advantages I see in commercial property ownership include:

1) Less tenant turnover = less time and headache 

Tenants of residential property are usually going to sign a one year lease. once that is up they're either moving, staying put or who knows what. With commercial a tenant (A business organization) is signing anywhere form a 3-10 year lease, sometimes up to 15-20 depending. Once a credit solid tenant is in place, landlords can sit back and collect the cash flow. 

2) Triple Net Leases

Commercial landlords are able to shift all costs of upkeep and keeping the doors open to the tenant. Tenants will pay for the usual water, electricity, snow removal but also can be required to pay insurance, property taxes, etc. This allows for less headache, time on your part, and greater cash flow. 

3) Cash Flow

Due to the higher cap rates of commercial property, they tend to cash flow higher than your typical residential property. Increased cash flow allows for a faster wealth building strategy. 

Of course there are drawbacks to each strategy as well. Without going into too much detail, a few to consider are capital startup costs, more risk per tenant, knowledge base to entry, tenant improvement costs depending on real estate product type, etc.