Many people start a real estate investment through residential real estate properties because they are used to purchasing homes, but in reality, it is better to invest on income-generating properties or commercial real estate properties fr higher returns. Even if you already have residential estate investments, having commercial properties can help in balancing your portfolio. Get ready for a primer by knowing all the rules and terms when it comes to commercial real estate investments. Let us get into the details on the differences between commercial and residential 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 a thirty-room apartment building and you lose four tenants, then you only lose a portion of the income instead of losing the entire rent as you would do 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. 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.
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 are the things they like about the previous management? Is there a boom in the businesses? Are residential houses being built in the area? What are the characteristics of the general population or demographic profile surrounding the commercial property? It is also a good idea asking the cash flow statements from the sellers. Don’t be afraid to invest and research on commercial real estate properties, because it is really rewarding understanding the ins and outs of commercial real estate investments.
Do you have plans buying a commercial property this year? You might consider investing in your own commercial real estate property to balance your portfolio. Now more than ever, start considering owning a commercial property because there are a lot of benefits owning one. If you want to know more about real estate investments, feel free to check our website or homepage now. Don’t limit what you can do for a great real estate investment.