Investing in commercial Real Estate vs investing in residential Real Estate

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CommercailVsResidentialPropertyInvesting in commercial Real Estate vs investing in residential Real Estate – 

Most people have their first experience of Real Estate investment when they buy their first home. Once they are a little settled in life, they may rent out their first home and buy another home and then yet another. Quite a few of them end up making a profit on their investments because the rent/lease exceeds the costs of keeping the home and because of the appreciation in the value of the property.

But investing in Real Estate does not have to be restricted to just the residential sector. There is a huge commercial Real Estate market that one could invest one’s money in. How does that stack up against investing in residential Real Estate? Very well, actually. In the Bay Area (San Francisco) for instance rental from commercial property generates a whopping 50 to 200% additional rental.

Part of it is attributable to the fact that there is no prescribed upper ceiling for rentals. Besides commercial property leases tend to be in favor of the landlord rather than the tenant, which is a marked departure from the way residential property leases are inclined to favor the tenants. Then there is also the question of the financial standing of the tenant which is way better in the case of commercial property. Besides commercial property leases tend to be long term extending from 5 to even 20 years, saving one the trouble of frequently renegotiating the terms.

It is not as if there is no down side to investing in commercial real estate and that residential real estate does not have any advantages. For one, managing commercial Real Estate is not as simple and straightforward as doing the same for residential Real Estate. One usually has to deal with multiple tenants and grapple with issues like a large number of leases, taking care of the maintenance expenses and public safety. You may even need to hire a professional to help you handle such issues. Also not everybody has the requisite financial strength to make the initial investment required to acquire commercial property. Not everyone has the time to devote themselves full time to the myriad issues that come with investing in commercial property.

At the end of the day everyone has to take their own individual decisions and both types of investments have their pros and cons. If high returns are the one of the many motivation and one is willing to cope with the challenges that come along with investing in commercial property, one should definitely look at it. If however one’s time is at a premium and one is happy with respectable returns from time to time, one may want to contact others participating within this industry and obtain information and assistance to invest in commercial or residential property.

Summary: Investing in both commercial and residential Real Estate has certain advantages and disadvantages. While the former brings in more returns and longer term leases they also require greater investment of time and having to deal with a lot of hassles. One could look at investing in either sector depending upon what one’s priorities are.





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