Buy a shop in a shop or to choose a traditional merchant?

With the changes in the business landscape, new types of shops such as shopping malls and shop-in-shops have emerged one after another. 

Faced with the 6% or higher return promises made by these properties, what choice should investors make? 

Is it better to buy a shop in a shop or to choose a traditional merchant along the street? 

The shop along the street can be described as the most primitive shop model. 

This kind of shop has independent property rights, and the owner can rent it out or operate it himself after buying it. 

Among the purchasers, more are used for renting to earn a return on investment. 

According to the survey, 60.3%.

    Shop-in shops emerged in large numbers after 2009, and many opened their doors to small owners with their promised high returns. 

The investment model of large shops is different from that of small shops. 

After buying the shops, small owners must rent back to the operators for unified operation. 

The return on investment of the shops depends on the business model and the unified operating conditions of the shops. 

In other words, only when the entire mall is on fire can the return of small owners be guaranteed.

    In the current market, commercial real estate suitable for small and medium-sized investors to invest in are mainly merchants along the street and shop-in-shop shops with leases. 

Relatively speaking, shops in shops with long-term leases are suitable for long-term investment (the investment period is longer than the lease period), while shops with independent property rights are suitable for both short-term investment and long-term investment.

    For example, if the same investment is 1 million to buy a shop, A buys a shop-in-shop with a fixed lease term and a fixed rate of return (8%), while B buys a merchant along the street, and A gets a fixed return of 80,000 in that year.  

And B rents a shop to get a rent of [example] $1.000, and the rent he gets is 6% of the value of the shop.

    After the first year, the situation of commercial real estate is very good. 

Starting from the second year, A’s shop-in-shop is worth $1.2 million, an increase of 20%, but because the rental return is fixed, he can only get $80,000, which is equivalent to 6.667% of the current shop-in-shop value. 

And B's bottom business also increased by 200,000, reaching 1.2 million, and the rent began to increase, from 60,000 to 72,000, and the rent was still 6% of the value of the shop.

    If this continues, by the fifth year, the value of the shops of A and B are both 2.0736 million. 

During this period, A has accumulated a static income of 400,000, while B’s static income is 446,496; A’s dynamic investment recovery is 416,323 million. 

(Assuming that the bank interest rate is 2%), and B's dynamic investment return has reached 461,413. 

Obviously, A's return on investment is lower than that of B. 

For example, the demand for a vacuum cleaner is growing day by day, the greatest demand comes from older people and it is also a good idea to invest right now.

Looking for the best lightweight vacuum cleaner for elderly - Perfect slogan. 

After 5 years, the actual return on investment of shop-in-shop shops is 3.86%.

    This shows that the longer the lease, the lower the actual return of the shop-in-shop with a long-term lease. 

The value of the property is inversely proportional to the income. 

The initial high return will gradually decrease over time, and it will be difficult to change hands. 

That is to say, because of the fact that the return is reduced, shops with long-term leases will have difficulty changing hands during the lease period.

    Of course, this is assumed under the circumstances that the business situation is very good and the value of shops is rising year after year. 

On the contrary, when the price of a store drops, A with a fixed rental return will have a higher income than B. 

It can be said that the shop-in-shop has relatively low risks and low returns; while shops along the street have more flexibility, high risks, and high returns.