Investing Decisions - Commercial vs. Residential?

Investing in residential and commercial properties has been proven to be quite prosperous for many people. 

But which types of real estate seem to be a wiser investment decision?

Let’s take a look at a few topics that are covered when thinking about investing.

One of the main strengths that commercial real estate properties have over residential is the quality of their leases.  Typically, residential tenants pay on a month to month basis.  This can be quite bothersome if someone is simply looking to invest and make some extra cash.  Alternatively, commercial real estate usually possesses leases that span over multiple years.  These are much lower maintenance, and typically more preferable to investors.

When it comes to repairs, it’s usually the lessee that has to pay for residential repairs.  A lessee can be expected to be woken up in the night to come fix a refrigerator, clogged toilet, air conditioner, etc.  Commercial real estate investors don’t have to deal with that headache.  Most times commercial real estate repairs fall under the leaser. 

Another strength that commercial contains is that they have the law enforcement on their side.  Well, more so than residential, that is.  When you own a residential property it is very difficult to evict tenants.  When it comes to commercial it is much easier for a landlord to evict an unruly tenant. 

Furthermore, commercial real estate will yield you less wear and tear.  If you are renting or leasing out your residential property chances are the person or family will be living there 24/7.  They will constantly be using the utilities and appliances.  With commercial, you typically don’t have that.  Most businesses utilize their property during normal working hours, and then lock it up and leave it alone for the night. 

On the grand spectrum of investing, commercial real estate investing always seems to take the cake.  They bring in more money, and require less upkeep.  Commercial real estate is a growing market. 

Tips And Tricks For Successful Commercial Real Estate Transactions

Investing in commercial real estate is no ‘get rich quick’ scheme.  Investing requires a lot of thought and planning.  To ensure you don’t waste your time and money in the commercial real estate world, take a look at a few of these tips.

Be open minded

Just because it has the word commercial doesn’t mean that it needs to be secluded to apartment blocks.  There are plenty of properties that fall under the commercial category.  Think about investing in offices or warehouses.  Both of which can bring you in a good chunk of cash if you invest wisely.

Shop savvy

Don’t just look for a good deal, look for the best deal.  With the economy how it currently is, there are plenty of deals out there that will satisfy your goals.  Be patient, and keep up a continued search.  Once you find a property negotiation is key.  Your prospects will rarely go as low as they are willing to go on the first offer.  Investigate to see how much wiggle room you have. 

Lose the rose tinted glasses

Be very critical of the property you are considering.  Don’t allow for the good in the property to over shine the bad.  Take the time to write down a pro/con sheet, and take it seriously!  I can’t tell you the amount of times investors overlook the negatives because they are awestruck with the property, price, location, or architecture.

Go big or go home

If you have the financing, make your purchase worth your time.  It’s the overall property that is pricey, so why waste your time and money on something that contains only a few units?  If you are already going through the trouble, try your best to find a property that is large and that has many units that can be rented.

Investing in commercial real estate is becoming more common.  With hard work, and the right amount of research, it’s probable that your ROI will make everything worthwhile.