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Commercial Investments are always one of the most solid sources of steady rental income. Therefore, if you’re looking to make a commercial investment in order to earn reliable yet steady rental income, you have the following options:
- Purchase a shop in a mall
- Purchase a serviced apartment
- Purchase a corporate office
Today, we are going to discuss some of the important advantages and disadvantages of each of the above-mentioned commercial investment.
Quickly moving forward let us study the pros and cons of each type of this commercial investment gradually.
Purchasing a Shop in a Mall
Purchasing a shop in a mall is one of the best options available in commercial investment. However, we recommend you to always opt for bigger malls as they offer bigger brands and much traction. Therefore, always prefer malls in downtown areas and with the potential of attracting big brands. Please do check the amenities and facilities offered by malls before making an investment such as a large retail area, enough parking space, entertainment options such as food court, play area, and cinemas.
Advantages:
- Malls are usually managed. Therefore, you don’t need to worry about your active involvement in managerial issues.
- There’s a lot of options available in shops in terms of size and price. Therefore, you can have it even if you’ve less budget.
- The rental income for the shop is higher than that of offices or plaza.
- The shop is an asset that can always be used by you to run your own business in compliance with mall policies.
- Easy installment plans are available in under-construction shopping malls.
- Purchasing a shop in the food court allows you to step into the food business.
- Shops offer healthy capital gains.
- Stability due to long term leases.
Disadvantages
- You’re bound to follow management policies enforced by the malls even if you’re renting out your shop.
- You will have to pay idle charges to the mall for managerial and maintenance, even if your shop has not been rented out.
Purchase a Corporate Office
Corporate offices are another good source of rental income from the commercial investment. The purpose build units to serve the business needs of different firms is designed to complement the offices.
Some of the advantages and disadvantages associated with such investment are as follows:
Advantages:
- Underconstruction buildings allow you to purchase corporate offices on easy installment plans.
- The building of your corporate office is also managed. So you don’t need to worry about it.
- Healthy capital gains over the years.
- Always available to use for your own business.
- Peace of mind due to long term lease.
Disadvantages:
- If your space is not rented, still, you will have to pay idle charges.
- The sale/resale of corporate offices may be slower as the trend is still developing.
Purchase a Serviced Apartment
This concept is also growing in Pakistan. The serviced apartment, located in central areas can be used for rental purposes or for booking as a guest house depending on the locality and size. The ease of using a short or mid-term rental unit makes it one of the most attractive, safe, and rewarding investment options.
Advantages
- Installment plans available
- Prices are comparatively lower than shops and corporate offices.
- Managerial issues regarding rent are often look-after by developers.
- Rental income is highly rewarding as it can offer up to 7 to 8 percent returns per annum.
- You can rent it out on your terms whenever you want, short, medium, or long term as per your convenience.
Disadvantages
- The model is still in its initial stage in Pakistan. However, this is a very lucrative model globally.
- The performance of the management will largely impact the return on your asset.
Hotels
As the name suggests, hotels are supposed to be located in the central and convenient areas of the city. They tend to be near major attractions or airports. The facilities and amenities hotels offer are usually lacking in serviced apartments such as room service, in-house catering, minibar, spa, or continental breakfast.
Investment in the hotel is almost similar to a service apartment with few additions. However, some developers also offer a hybrid solution between hotels and serviced apartments, which are quite convenient as well as lucrative.
Advantages
- Up to 10 percent rental income yearly
- Easy investment plans.
- Lower prices as compared to shops and offices.
- Rental management is usually offered by the developer.
Disadvantages
- Return of your asset and rental income will completely rely on the hotel management and their services.
- The room will be under the custody of hotel management and you cannot opt to live in it except for 30 days in a year or as per the hotel’s policy.
- In case, hotel management fails to meet customer expectations. You will suffer as the building is purpose-built and you cannot use your room for any other independent purpose. If the hotel performs poorly you suffer as the building is purpose-built and can not be used as apartments.
What is the best commercial investment for you?
The best commercial investment as per your situation depends on a lot of other factors rather than just the investment type. Any commercial investment, be it shop or service apartment, hotel, or corporate office, if they fail to comply with the fundamental estimations and rules of commercial investment, will ultimately fall. Many people believe that investment in independent buildings is the safest option. But this concept has failed in many localities. Like other investments, commercial real estate investment also demands the right call for the right property.
Therefore, we cannot advise generally considering the fact that every individual has different preferences and financial standing. However, it’s always good to have passive rental income to keep yourself away from the worries of actively managing these properties. Moreover, the passive investments are also giving higher rental returns making it a win-win situation in both aspects.