Any property whether commercial or residential is a fantastic investment venture. However, it is important to know exactly what you are getting into when trying to invest in anything. Both types of properties come with their own advantages and disadvantages.
However, a balance of the two is the ideal situation for any investor. How can you decide what to invest in? Let us discuss the pros of both types of properties to help you make a wise investment.
Commercial property generally results in higher reward than residential property. These are properties like rental apartments, retail buildings, warehouses and industrial buildings.
Commercial properties have a high income earning potential. They usually have a high annual return that allows you to get your investment return quite fast.
Commercial properties are known to be very well maintained and the owners keep up on repairs and improve the property in order to retain and attract more clients. This is beneficial because in a commercial property the tenants and the owners have similar interests in keeping the property up to standard. The clients need the property to remain maintained in order to ensure that their potential customers have a good first impression of their business.
In commercial property the owners and the clients operate within a business framework and take the relationship as a work relationship. This fosters strict regulations when it comes to the operations within the business, security regulations and other property matters. This means that rules are abided by and this makes for a great working environment.
In commercial properties clients are limited to operating within the allowed operating hours. This enables the owners to enhance certain auxiliary services for the benefit of the business owners such as proper security at non-working hours, proper cleaning services after the premises is vacated. Also since owners are sure that clients have left the building they can rest assured that they will not have to tend to any sudden emergency involving a client, such as an emergency repair.
Commercial properties are a wise investment as the purchasing price is based on the current owner’s income and does not deviate from that figure much. It also is a set figure depending on the area the property is located in. Usually there is no emotional attachment to the building and this enables the owner to set a reasonable selling price for the building. This is very beneficial to any potential investor such as yourself as you can get the best value for your money.
Commercial properties come with their own headaches as well. They require your undivided attention due to the multiple commitments that the property requires. Therefore, you have to be an attentive and available landlord. This is the only way that you can maximize on your returns.
Commercial properties also require a landlord to hire other assistance staff to help with the building maintenance, repairs, supervision and care of the property. This is an extra cost for you as an owner because it is actually impossible for you to cater to the needs of all the multiple leases by yourself.
Commercial property requires quite a large initial investment, and this may set you back financially for quite some time. The upfront capital needed can be impossible for some to conjure up and this may result in fewer investments made on commercial properties. Similarly, due to how large the property is, repairs and maintenance become such a large expense for the owner.
In the end, though commercial property generates more income, i would personally go for residential properties for the following reasons.
Firstly, residential properties are more and easier to find no matter where you are. They are a very convenient investment that does not require extensive research before purchasing. Due to their availability it is easier for a potential buyer to negotiate the price at which they are willing to purchase the property and they can even make this purchase below the market price if they are excellent at negotiating.
They are a great source of constant cash flow with very little going into expenses. They are therefore a better general investment for you. It is much easier to determine what the property you have set your eye on will cost, the cost of making repairs to it and how much rent it can generate for you.
It is easier to determine a lot of factors that may influence and affect the rent of residential properties due to the few tenants you are dealing with. The logistics is just way simpler. For instance, in a financial crisis or when the market has gone down it is clear that residential properties end up being more stable in such volatile situations. This is because everyone would prefer to keep their homes and surrender their business premises and settle for a cheaper option or just work from home instead. Commercial properties are not a primary requirement for everyone as residential property is.
Residential property may have flexible leases due to the fact that to find tenants for your property may not be as difficult as securing tenants for a commercial property. This also makes residential leases easier to understand and draft, and this makes tenants very happy since they can negotiate if need be and fully understand their obligations within the contract.
Residential properties require very low upfront costs to purchase and have a wide range of payment options available to you, the investor. This means that you do not have to be in any big hurry to spend a large sum to get the property you want, and it gives you some financial relief as you are not stretched too thin.
Residential property is easier to manage in the long run. Actually, your involvement as a landlord is very minimal allowing you to focus your time and attention on many more other investment opportunities with live love at home real estate. They do not consume your time fully and if any issue arises they are usually small scale and can be done reasonable fast.