The Benefits of Investing in Commercial Real Estate Malaysia

Investment into this category include properties with commercial land titles, such as shop houses, retail lots, SOVOs (small office, versatile office), SOFOs (small office, flexible office) and more - You may get it clear by reading this - HERE .

Investment in commercial titled properties are typically leased out for business usage only.

• How to Earn from Commercial Property Investments?

• Advantages of Investing in Commercial Property

• Disadvantages of Investing in Commercial Property

There are 2 major ways to generate profit from commercial property, check it out below:

How to Earn from Commercial Property Investments?

1. Buy-To-Rent

One of the best way to earn from commercial property investment is to purchase the property and rent it out in order to earn rental income. And keep in mind, you should do some research on the type of property that you are buying, the location, the environment (crime rate, facilities and amenities), and the potential tenants that you want or may attract.

So, before confirming a prospective tenant, you should do some basic background check on them and prepare a proper tenancy agreement to further protect yourself and the tenant's rights. Depending on mutual agreement with your tenant, visit your rented unit regularly to monitor the condition of the property and establish a good connection with your tenant.

1. Buy-To-Sell

Another way that you can earn money from your property is to buy the property and resell to another prospect buyer.

With the buying-to-sell strategy, you should consider if you have the necessary commitment (e.g. renovation cost, maintenance fee, quit rent, assessment tax, utilities expenses) to hold on to the property until it is sold, sometimes it takes few months to few years. This may involve higher costs or a longer time to get the ‘right’ buyer.

Advantages of Investing in Commercial Property

Here are some of the advantages of buying commercial real estate over residential property:

1. Longer leases

Commercial properties are basically involved in multi-year leasing like 2 to 5 years or sometimes more. If you can attract reliable tenants which are reliable, such as large corporations, SMEs, government departments or well-known reputable brands, you can attain greater and stable cash flow from it.

2. Can divide space for various businesses

A commercial real estate investor can plan and use the large place by dividing it for several businesses.

For example, an investor who buys commercial real estate can open up a grocery store, an eatery, and a joint co-working area to accumulate a higher profit. Since the spaces in one commercial real estate differ in size, you can rent them at different rates according to the space.

3. Professional relationships

Small business owners tend to take pride in their businesses and want to protect their livelihood. Owners of commercial properties are usually not individuals, but including partners, and operate the property as a business. As such, the landlord and tenant have more of a business-to-business customer relationship, which helps keep interactions professional and courteous.

4. Public eye on the property

People love beautiful stuff! Right? Retail tenants have to maintain or beautify their store and storefront, because if they don't, it will affect their business. As a result, commercial tenants and property owner interests are aligned, it is a win-win situation, which helps the owner sustain and enhance the quality of the property, and lastly, the value of their investment.

Disadvantages of Investing in Commercial Property

While there are many positive reasons to invest in commercial real estate over residential, but there are also negative issues to consider:

1. Bigger initial investment

Once you've acquired a commercial property, you can expect some large capital expenditures to follow. Your property might be humming along for a few months and wham, here comes the few hundred to few thousand ringgit of maintenance fee per month, quit rent per annum, assessment tax per annum, and utilities expenses per month.

2. High reward, High risk

You can face a very high risk if your commercial property does not run smoothly by issuing a high payment for an extended period.

Commercial properties mostly for public visitors or customers, therefore, have more people who can damage your property. When this happens, you need to spend more money to service and maintain it to ensure the environment is safe for people.

These are the advantages and disadvantages that come with investing in commercial real estate, it is highly recommended that you consult with a real estate professional before carrying out your decision. Learn more by click the button below.

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