Realestateweb - Top Stories - Big bucks: Commercial property ...

January is traditionally an "eyes wide open" month. Consumers come down to earth from the dizzy heights of the holiday season and the festive glut makes way for goal setting and introspection. Gym workouts replace beach lollies and the expression "Let`s go for Japanese" implies exploiting opportunities in the Far East rather than hitting the local sushi deli.

At this time of year, residential real estate investors, struck by the most dismal returns of 2009, are looking for alternative ways to generate wealth

What if we could diversify and still hold on to good ol` bricks and mortar?

We can through commercial property and the returns could be very lucrative indeed. The "Trumps" of the world have been doing it for years. Yet this is an area where many fear to tread. To determine if this fear is justified, let`s uncover the myths.   

Myth 1: Commercial property is more risky

False. Commercial tenants view their rentals as operating and tax deductible expenses of the business. They are willing (perhaps not ecstatic though!) to pay as long as they are deriving an income from the premises. Certainly there is a chance their business will fail but there is more of an incentive to pay when compared to residential tenants who often resent their exploitative, greedy landlord. Furthermore, there is less government protection for non paying commercial tenants than for residential tenants.

Myth 2: It is more difficult to secure a commercial tenant

True. If a house has not been rented, it is because the rent is too high. Drop the price (sometimes drastically) and you will probably find a tenant. On the other hand, when a commercial property is empty it may not be because of the rental level but because the property is only suited to certain activities, one may not be able to mould any operation into the premises.

Myth 3: You need greater capital to invest in commercial real estate....

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