Demetrios Salpoglou: What are the Differences Between Residential and Commercial Real Estate Investments Many people are used to purchasing residential real estate because they want to gain the benefits of real estate investments, but commercial real estate investments are actually better in terms of return of investment. Even if you already have residential estate investments, […]
Many people are used to purchasing residential real estate because they want to gain the benefits of real estate investments, but commercial real estate investments are actually better in terms of return of investment. 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. Allow us to share with you some insights regarding the differences between residential and commercial real estate properties.
Unlike the income you can generate from residential properties, the value of commercial real estate properties is directly related to the usage square footage. Having a commercial property can help to diversify the risks. 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 greater with commercial real estate investments because you lease the property and if you have more tenants, you generate 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, needing higher down payment than residential properties.
Before investing on a commercial property, it pays off doing your homework by finding out the vacancy rates of previous owners and talking to storefront managers to find out what they like and about their business. Are they still interested renewing their leases? What did they like about the previous management? Is there a boom in the businesses? Are houses being built surrounding the commercial property? What is the demographic profile in the area? It is also a good idea asking for the cash flow of the sellers or tenants in the commercial property. It can be rewarding understanding the ins and outs of commercial real estate investing.
Are you considering investing in a commercial property today? You might consider investing in your own commercial real estate property to balance your portfolio. 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. Allow us to help you learn more about real estate investing by visiting our website or homepage now. Embrace commercial property investments and become a successful real estate investor.