Michigan commercial real estate is typically more expensive to purchase as an investment than residential houses. This type of real estate includes vacant land, apartment and office buildings, retail stores and shopping centers, warehouses, restaurants, movie theatres and hotels. Owners earn a steady stream of income by leasing the property.
Commercial leases
Commercial real estate leases often require the tenant to pay for their share of the building expenses in addition to the monthly rent. A triple-net lease includes charges for property tax, insurance and maintenance costs for the common areas. If these costs increase, so does the tenant’s monthly bill.
Shopping mall tenants may have to sign a percentage lease, which compels them to pay a flat monthly fee plus a percentage of their gross monthly sales to the landlord. In return, the owner maintains the grounds and finds compatible retail businesses to drive foot traffic to the mall, benefiting all the stores.
Additional income
Property owners may earn additional income by installing vending machines in apartment and office buildings, building a parking garage and adding a pay-as-you-go laundry room to multifamily complexes. They can even lease their air rights and allow a communication company to erect a cellphone tower on top of a building.
Resale value
Commercial real estate properties can appreciate in value, and many owners realize a significant profit when they sell. Unlike residential real estate, commercial owners don’t need to liquidate their holdings due to a job relocation or downsizing after the kids are grown. Instead, they may be able to hold onto their property and sell at the most financially advantageous time.
Commercial real estate has risks, but it can yield substantial monthly income. Do what you can to maintain an uninterrupted income stream by keeping the tenants happy.