The main driver of any commercial real estate investment decision is the expected return on investment (ROI) on the property. Generating a sustainable ROI comes down to discovering opportunities, taking risks, and doing your due diligence. Experts also say that your ROI depends on how much risk you’re willing to take. The greater the risk, the greater the return will be.
Let’s dig deeper into how commercial real estate owners can increase their ROI:
Regardless of the type of commercial property, one of the most effective ways to boost ROI is to reduce the annual costs. Whether you own a shopping center, strip mall, or retail center, closely look at your facility’s overall expenses, including maintenance, upgrades, etc. and decide where you can cut down the costs.
In some cases, leveraging technology can improve the efficiency of your building, thereby reducing maintenance and operations costs. For example, by installing robust security solutions, you may not need a security guard anymore. Similarly, hiring a property manager should improve your responsiveness to service requests. When problems are addressed before they exacerbate into bigger issues, you get to save a lot of money.
Invest in Less Expensive Properties
Outrageously high property prices are a big barrier to realizing decent returns on commercial property investment. Therefore, a simple way to maximize your ROI is to purchase properties at the lowest possible prices. The payback period should be considerably shorter when you calculate your ROI against a lower purchase price and other fees.
Again, an experienced property manager with better market access and extraordinary negotiation power can help you acquire commercial properties at the best rates.
Make Regular Upgrades
Once you’ve invested in low-cost commercial property, do your best to boost its overall value. This is where improvements come into play. By making upgrades to your retail center and/or multi-family residential property, you make it more attractive to high-quality or reliable tenants.
You should then expect better monthly income or rent, increased occupancy rates, and a higher property value. Each of these aspects contributes to generating a better ROI on your commercial property investment. Also, the improvements can help you justify an increase in rent. If the upgrade has to with amenities such as an addition of a green space for pets, you might be able to attract new tenants easily.