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May 03, 2018
Key Takeaways
Investors deciding between commercial and residential real estate, they must consider their long-term goals, tolerance to risk, amount of available capital, and time they are willing to devote to the project.
Higher returns and cash flow is arguably the biggest benefit of a commercial real estate investment over a residential one.
Residential loans are typically paid off over 30 years while commercial loans are typically paid off over five to 20 years.
Deciding between commercial vs residential real estate investing is not a decision that will be made overnight. Each strategy offers its own set of benefits as well as its own set of challenges. The path an investor chooses to take will depend on his or her goals, risk tolerance, liquid capital, and time. Review the following benefits before making your final choice.
The technical difference between a residential and commercial property is as follows: Residential real estate is all single family type homes and one to four unit rental residences while a commercial property is anything with five or more units. Condos, duplexes, and quadruplexes make up residential real estate while office, retail, industrial, multifamily (of five units or more), hotel, and special purpose buildings make up commercial real estate.
Another stark difference between commercial and residential properties is in the type of tenant each building attracts. Residential properties are typically leased to families and individuals while commercial properties are typically leased to businesses.
Lastly, each property type comes with a different set of opportunities. Commercial real estate tends to award investors a much wider range of potential investments. For one example, there are more commercial property investment funds than residential ones. On the other hand, residential real estate investing tends to be more hands on.
Smart investors know that it is of utmost importance to evaluate all the pros and cons before making a final investment decision. However, these benefits of commercial real estate investing are undeniable.
Both commercial and residential real estate investing have positives and negatives. To decide which strategy is right for you, it’s important to review the benefits and determine which ones align more with you and your business’ core values.
– Commercial Vs Residential Real Estate Investing: Which Strategy Is Right For You?