As a property investor, I’ve been involved with both residential and commercial investments. Both provide excellent opportunities for investors, but one type of property may suit your abilities, finances, and needs better. Read the pros and cons of each of these property types before deciding which route to go.
Residential Property – Pros
When you compare the cost of investment, residential properties beat commercial ones. They tend to be more affordable for the investor and require less money up front. People always need a place to live, and whether you’re looking at single family homes or multi-family buildings, there are people to rent them.
Investing in rental properties is an easy business to understand and master. Once you’ve bought a house or two, you’ll know the process and will be able to estimate the costs and the potential earnings you can gain from it. Commercial properties vary so widely that investing in them is hard to master as every property could be different.
In a market that has slowed down, residential properties hold their value better. If you can manage to rent your properties and can hold out, the market will swing up again. The sheer number of residential properties on the market is also much higher than commercial, making it easier to find good properties to invest in.
Residential Property – Cons
Too often, tenants mistreat rentals. There are laws protecting tenants, and you’ll have to take on landlord property maintenance duties. Leases are shorter in residential than in commercial properties, and the income potential is lower.
Commercial Property – Pros
There is a wide range of commercial properties, from office buildings to industrial warehouses. The diversity of commercial properties means that there are, in general, higher profits to be made. The income potential of commercial properties is higher than that of residential properties.
If you’re renting space, you’re likely to have better relationships and tenants than you would in a residential property. The cleanliness and look of their space affect their business, and they’re more likely to keep up on maintenance. You’re also dealing with professionals and will enjoy a more professional relationship with your tenants.
When searching for a potential commercial property to buy, you can request the current owner’s income statements. This lets you see the real value and potential earnings the property can bring. Pricing on these properties tends to be fairer because there are less emotional factors involved.
Commercial Property – Cons
One downside to owning commercial property is the time. You may have multiple lessees who need attention, and you’ll have more to manage than you would with a single family home. You also have more significant worries such as public safety concerns and proper maintenance. If you want to do repairs yourself, you may need a license to work on the commercial property.
The initial investment of commercial property is higher than with residential investment. You will need more money to put down at the start, meaning commercial property may not be the right choice for your first investment. Repair costs are also higher since buildings and property tend to be larger than a residential property.
Investors looking to earn more money and who have the capital needed to invest in commercial property should look there. Those who are just beginning to invest in property may be better off starting with residential properties. Speak with an expert before jumping into any kind of investing so you can make an informed opinion. As such an expert, I can help you determine which investment suits you better. Schedule an appointment with Adpen to discuss your ideal investment opportunities. My website offers a blog to subscribe to and promotes great investment opportunities. Get started with Adpen and use our expert services to help you make the best decisions for you.