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. In this article, let us dig deeper on the differences between residential and commercial real estate properties.
Commercial real estate properties produce income differently because it is directly related to the usage square footage, which is not always the case for residential properties. Commercial real estate properties can help in diversifying the risks. For example, if you have an apartment building and you lose three of your 15 tenants, then you only lose a portion of the income instead of losing the entire rent as you would in a single-family residence. There is a greater cash flow owning a commercial real estate property because you lease per square foot and so 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.
Conducting a thorough research is very important before you invest in a commercial real estate property so find 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? What is the success rate of each tenant? Are there any residential properties currently built in the area? What are the characteristics of the general population or demographic profile surrounding the commercial property? You may want to also ask the status of the cash flow from the tenants. It can be extremely rewarding for you if you will only understand the e ins and outs of commercial real estate investing.
Do you have plans buying a commercial property this year? This must be the right time for you to consider investing in commercial real estate properties. Now more than ever, start considering owning a commercial property because there are a lot of benefits owning one. Feel free to check our homepage or website if you want to learn more about real estate investments. Embrace commercial property investments and become a successful real estate investor.