Commercial properties are most successful when the property helps the leasers make a profit and establish themselves as a business through an appropriate layout, nice windows, and the space they need. Residential real estate is the most appealing, when potential buyers are able to see themselves living a comfortable, happy and convenient life within the property. So, as the investor, which property option is best for you?
Of course, there are perks and disadvantages to both property types. To know which property type is best for you as the investor, it’s important to know what your goals, ideas, interests and business model really works well with. So, as you ask a potential buyer or leaser what their goal and purpose of the property is, you have to ask yourself the same question.
Before investing in your next commercial or residential property, make sure to ask yourself these questions:
- What are your short and long term goals?
- What are your current assets, and which type of investment would benefit you the most?
- What does your current business model consist of, and what would need to change in the future based on the property you choose?
- Who do you have to help fix up the purchased property, and to put the property on the market?
What To Know About Commercial Properties:
Commercial properties come in all shapes and sizes – and locations. Whether you’re looking to purchase an entire strip mall, or a couple business offices, the outlook of your options are extremely optimistic and positive. The perks to investing in commercial properties include:
Most commercial properties are leased to businesses, which means long-term, consistent income. As the investor and owner of the property, you can delegate the rent upkeep and other property expenses to your property manager to determine and manage. So, you’re receiving monthly income, with little to no involvement.
Ensuring appreciation, rather than adding depreciation
When you rent out your commercial real estate, you’re adding appreciation to your property, and in turn, your investment. As companies come into the building, there are bound to be changes to make to suit the business. Regardless of who covers that initial cost, you’re going to receive the benefits in the long run when you turn to re-lease or sell the property.
Leverage for more cash and investments
As an investor of real estate properties, you have more opportunities when it comes to cash flow and other further investments. If you place positive leverage on your real estate property (asset), you’re not just increasing, but multiplying your net spendable cash.
According to a recent assessment of commercial real estate trends, investments for such properties is finally reaching the 2008, pre-burst level. Unlike 2008, however, there’s little risk with investing. The market is healthier, stronger and more secure than before.
Everything to Know About Residential Properties:
The current residential trend for homebuyers and renters alike consists of multi-purpose spaces, convenience, and a substantial increase in the attraction to fixer-uppers. If you’re in the business of flipping houses, residential real estate is your best bet. Not into flipping houses, but still interested in being a landlord? Residential properties are still a great investment for you.
If you’re currently an investor, and hire out your property management and other duties, you know that residential properties do hold a consistent value to your cash flow and assets. Just getting into residential real estate? Here’s the value you need to know:
Multi-family properties provide consistent cash flow.
Multi-family properties come with more area to keep up to date, and more people to manage. However, this all comes with higher, more consistent cash flow. Millennials continue to flood the real estate market. This generation is getting married later in life if at all, and waiting to have kids. This trend, or way of life, does not look to change with the next generation coming into adulthood either. With these changes, apartments and condos are a top choice for most young adults.
With the right location and price, you’re bound to attract numerous tenants who are looking for long-term leasing options, ensuring a high ROI for you.
Single-family properties ensure a predictable ROI.
Single-family homes are continuing to hold a large impact on the market. With single parent families, and just smaller families in general, single-family properties can still be smaller, quaint homes. Larger homes are still enticing for the right price.
Most people looking to move into single-family locations are either relocating for a job, or growing out of the multi-family properties. Either way, the most common need is stability. For you, this means stability in monthly occupancy and rent income.
So, Will Your Next Investment be Commercial or Residential?
Regardless of the property type – commercial or residential, it’s important to know the area. Get to know the people in the area, and find out what their needs and interests are. The more you can know about your potential renters or leasers, the easier your decisions become. You can now know the local market from a personal perspective, and provide the type of property the people are looking for.
It’s important to also get to know the comps in the area along with the history of the location. Knowing the history will help guide you through your choices, steering you away from what didn’t work in the past. Or, what has always been missing. Fulfilling the need of your potential customers will set you apart from competition, and establish a reputation you always want for future investments.
Adding diversity to your real estate portfolio will equip you with the experience, asset and leverage to continue expanding your investments, but both properties come with advantages and disadvantages. It comes down to what you are wanting to put your money, energy and time into – working with businesses or working with people’s homes. The answer to this question still comes down to what you want out of investing in real estate. Are you looking to be a small-scale investor and landlord, or looking to establish a fully-equipped real estate agency?