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Benefits and Risks in Investing Commercial & Residential Real Estate

Understand the pros & cons of investing in Commercial and Residential Real Estate.

Investing in commercial or residential real estate is not as difficult as it may looks. Any property, it could be commercial or residential which always is a good investment opportunity. As far as your hard money is concerned commercial properties offer more financial gain as compared to residential properties, like rental apartments or pent house, villas, Duplex houses sometimes there also can be more risks. Point of discussion here is to understand the whole concept of the pros & cons investing in Commercial and Residential Real Estate.

What are the types of commercial property-----

Commercial properties may refer to:

Office Buildings

Warehouses

Industrial Buildings

Retail Buildings

Commercial Space

 What are the types of residential property------

Here residential properties refer to:

Apartments

Villas

Row House

Bungalow

Penthouses

Residential Buildings

Residential Towers

 Let’s discuss here about some of the pros of buying commercial real estate over residential property.

1) Returns on Investment------ One of the biggest profitable reasons to invest in commercial are mainly related to earning potential. Commercial properties generally provides an annual return off the purchase price between 7% and 15%, depending on the area and which is a much higher as compare to your invested amount.

Residential investment which ranges between 1% to 4% normally at best.

 2) Professional correlation------- Owners who runs small scale business usually take pride and want to protect their daily earnings as livelihood. Owners of commercial properties are not individuals and operate business from property. Therefore the landlord and tenant have more B2B relationships which help them to keep communications transparent and professional.

3) Location, location------ Never forget about the location for your commercial and residential investment. Location is everything and has to be top of the list. Commercial properties provide returns by two ways

1) Rent & 2) Capital appreciation and both are mainly dependent on the location. A high location gives heavy appreciation in long run.

5) Limited hours of operation------ Now days many such cases businesses usually go home at night mean in other form, you work when they work. Therefore, most of the amenities offered at the work places in the form of coffee, refreshment facilities, fire alarm or any other kind of emergency alarm so these types of facilities help to commercial properties where you will have an alarm monitoring service if anything happens at night, your alarm company will notify the proper authorities.

When such situation arises then administration team who handles such problems takes care as now a day’s many developer provides 4 tier securities in their townships.

6) More flexibility in lease terms------ Commercial lease strictures are different from residential ones.  They are structured as 9-yearS or 15-years lease with escalations every 3 years or 5 years. Sometimes they are also one-sided. Commercial lease structure comes with long term and residential with short term.  Landlord and tenant both have to keep in mind rules and regulations specified regarding lease agreement and should be followed to avoid any wrong practices. In general, the longer the lock-in, the better it is for the investor.