Wealthy property investors do not play the property investing game like the rest.
They choose commercial properties over residential properties. Because it cuts down a lot of the tenancy related issues that come with residential property investment.
Why commercial properties? One of the reasons is that residential property tenants are always hunting for the ‘best deal’, the lowest rental price that a landlord can offer. Tenants move in and move out all the time, they won’t hesitate to pack their stuff and move out if another unit offers them a lower rental rate.
How Wealthy Property Investors Invest Differently - The 3 Mindset And Strategy They Use
1 Wealthy Investors Truly Don’t Have Time
Wealthy investors are busy and they don’t have time to manage all these tenancy-related issues described above – they tend to spend their time on other higher ROI things like their businesses. That is why they prefer to buy and invest in commercial properties for the long term.
Moreover, if commercial real estate tenants' businesses are doing good, they will prefer to remain there, so they will not move in and out frequently. And they are more than happy to pay higher rental if their businesses are thriving.
Furthermore, landlords can sign longer leases for commercial real estate properties.
2 Wealthy Real Estate Investors Wants High Control Over Their Investments
This element is lacking in residential real estate property investments.
When a landlord for residential real estate deals with tenants, normally the landlord has less negotiation power, not to mention the fact it is a very ‘overcrowded’ space because the barrier of entry is low, let say a RM 500K condominium versus a 5 Million shop-lot.
For instance, when you are a landlord of a condominium, you are competing against 120 other landlords in the same building block, who will try to undercut you on the rental rate – such as normally rental is RM 1,300, but when outside there is a lot of competition, tenants may negotiate the rental rate to RM 1,150 per month.
Additionally, if your commercial unit is in a competitive area, tenants would be lining up should your existing one choose to terminate or not renew his tenancy, sparing you the hassle of finding new tenants. As tenancy periods for commercial units are longer compared to residential ones, you save on agent commissions.
While in property management matters, residential property tenants will prefer units with furnishings or renovations. In contrast, commercial property tenants prefer their units bare, as they usually want to design and renovate them to their liking.
All in all, wealthy investors are not using property investment to get rich. Instead, property investment is just one way for them to park their wealth for the long term.
3 Wealthy Investors Will Maximize Their Return On Investments (ROI)
In other words, the mindset of maximizing results with minimal effort.
Most commercial real estate properties are rented out bare, no need for renovations. All renovation costs are borne by the tenants, they need to customize the unit fixtures and layout per their business needs.
This also means that tenants in commercial properties do not easily move out from the premises because they’ve put a lot of resources into the renovation, compared to tenants in residential properties.
And because they are doing business and have invested a substantial sum in the premise renovation, tenants in commercial real estate property will take good care of the unit itself, compared to tenants renting a residential real estate property.
If you have RM 500,000 sitting in your bank account now, would you prefer to invest in a 2 Million commercial property or park than in a fixed deposit?
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