A Quick Commercial Property Investment Guide

What is Commercial Property?

The term commercial property (also referred to as commercial real estate, investment or income property) refers to building or land intended to generate a profit, either from capital gain or rental income.

What Type of Property is included in Commercial Real Estate?

Commercial real estate is classified as property assets that are primarily used for business purposes. Commercial real estate is commonly divided into the following categories:

• Office buildings

• Industrial property

• Retail/Restaurant

• Multifamily housing buildings and

• Farm/Rural land.

In addition to the above, commercial real estate can include any other non-residential properties, such as:

• Medical centres

• Hotels

• Warehouses

• Malls and

• Self-storage developments.

What are the differences between Commercial Property and Residential Property Investments?

When you invest in commercial property, you still expect to rent out your property and receive rental income from a tenant as you do when you purchase a residential property investment. However, the major difference between investing in commercial property compared to residential property is the Rental Agreement. With commercial real estate, the property is usually leased to a business under a detailed contract for a much longer period (e.g. three, five or ten years).

There are some other important differences such as:

• The Tenant is usually called a Lessee;

• Vacancies between tenancies can be longer;

• Goods and Services Tax applies to commercial property (i.e. to the purchase price, rent received and any expenses in relation to the property); and

• Maintenance costs are usually paid for by the Lessee, which means net rental income tends to be higher.