Many owners of commercial real estate properties in Boston and elsewhere do not reside anywhere near the property. This holds true for apartment buildings, office space and warehousing properties.
This financial arrangement holds both benefits and dangers for these absentee owners.
Advantages of distant ownership
An article in MasterClass lists some of the reasons people come to own distant commercial real estate properties. These include inheritance, the desire for passive investments and a lack of interest in the management of a property. In these scenarios, the owner reaps some obvious benefits of this arrangement.
The first involves a higher level of freedom. The owner can live far from the real estate in question while receiving a steady paycheck from this passive investment. The investor can also acquire multiple properties in various locations and can hire property managers to do the daily work. The goal of this approach focuses on receiving a steady stream of income.
Disadvantages of absentee ownership
Of course, not everything in the commercial real estate field results in trouble-free ownership, and expenses could run higher with this approach. The property manager represents an additional fee and this could become significant depending upon the situation. Trends in the labor market could also drive up the salary of the manager.
The quality of the manager could lead to a lack of control and result in frustrations that require personal attention. This could lead to everything from property damage to lawsuits from tenants. An absentee owner might also have less knowledge of each property, making it difficult to know the best time to sell and when to buy a commercial property.