Many people start a real estate investment through residential real estate properties because they are used to purchasing homes, but in reality, it is better to invest on income-generating properties or commercial real estate properties fr higher returns. Even if you already have residential estate investments, having commercial properties can help in balancing your portfolio. All you need to do is research and know the rules and terms when it comes to commercial real estate investments. Let us get into the details on the differences between commercial and residential real estate properties.
Commercial real estate properties produce income differently because it is directly related to the usage square footage, which is not always the case for residential properties. Diversify the risk of real estate investments by investing on commercial properties. For instance, if you own an apartment complex and you lose two of your 20 tenants, then you only lose a portion of the income instead of the entire rent as you would lose in a single-family residence. Cash flow is higher owning a commercial real estate property because you have it leased or rented per square footage, and more tenants you have, the greater cash flow it is, generating more income than what you can get by owning a single family dwelling. Because commercial property leases are generally much longer than residential leases, this greatly helps with your cash flow’s stability. Banks and other financial institutions value commercial real estate properties differently, that’s why they require higher down payment than residential properties.
Conducting a thorough research is very important before you invest in a commercial real estate property so find out the vacancy rates of previous owners and talking to storefront managers to find out what they like and about their business. Do they have plans renewing their leases? What are the things they like about the previous management? Are the businesses booming? Are residential houses being built in the area? What is the demographic profile in the area? You may want to also ask the status of the cash flow from the tenants. Don’t be afraid to invest and research on commercial real estate properties, because it is really rewarding understanding the ins and outs of commercial real estate investments.
Are you planning buying a commercial property this year? This must be the right time for you to consider investing in commercial real estate properties. Enjoy the great benefits owning a commercial real estate property that you won’t be able to obtain from owning a residential real estate property. Feel free to check our homepage or website if you want to learn more about real estate investments. It is time to embrace investing in commercial properties and become a successful real estate investor.