Many of us are accustomed to buying residential real estate properties, but investing in commercial real estate is actually the better way to gain higher return on 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.
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 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. Commercial real estate property investments provide more stability on your cash flow because their leases are generally much longer than residential leases. Because banks and other financial institutions value commercial real estate properties differently, they are requiring higher down payment than residential properties.
It is crucial to do research before investing in an income-producing property or commercial property such as find out the vacancy rates of previous owners and by interacting to storefront managers to find out what they like and about their business. Are they still planning to renew their leases? What are the things they like about the former management? Is there a boom in the businesses? Are residential houses being built in the area? What is the demographic profile in the area? 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.
Are you planning buying a commercial property this year? This must be the right time for you to consider investing in commercial real estate properties. 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. If you want to know more about real estate investments, feel free to check our website or homepage now. Embrace commercial property investments and become a successful real estate investor.