When you own commercial property in your real estate portfolio, you’ll have two primary options: You can lease the property out to bring in an income or you can sell the property to make a profit.
Selling commercial real estate allows you to completely remove it from your portfolio and invest any profits you make into other properties. Leasing, on the other hand, lets you keep the property while also making money off the leasing agreement.
When you have choices, look at your goals
Whether it’s better to lease or sell depends on your goals for the property. If this is a property that you see yourself “flipping” for a profit because of being able to buy it at a low price or due to big moves in the real estate market, then selling may be a good idea. Once you sell, you’ll have the capital to put into another investment or different real estate.
Leasing is a good option if your property is in a location where you have interested parties contacting you to lease the space. If you can lease the property and bring in a profit each month, you can develop a steady income while you allow the value of the property (and your equity) to rise over time. If the market is soft or you don’t have a lot of value in your property, that may be the best solution.
Leasing may not be the right choice if you’re looking to get capital now or if you need to sell because of high mortgage rates or low interest from potential tenants. Leasing is also not the best choice for those who don’t have an interest in becoming a landlord.
Building a portfolio of commercial real estate can help you grow your wealth, but you do need to be cautious about how you treat those properties. Evaluate every property you purchase to decide the best exit strategy and decide how to make the most from the purchase.