We’re still in the middle of a real estate tornado. A solid year and a half of an unwavering seller’s market is starting to shift, though not necessarily in favor of buyers. Is real estate still a good investment?
The answer is yes. While the real estate market is volatile, real estate is one of the few assets that’s all but guaranteed to appreciate over time.
If you’re considering investing in real estate, you’ll need to think about commercial vs residential real estate.
We’re here to give you a quick guide to the pros and cons of both. Read on to find out more.
Investing in Commercial Real Estate
Commercial real estate encompasses any properties that are used for commercial reasons. This can include storefronts, office spaces, warehouses, manufacturing plants, and lots used to store commercial vehicles. Owning commercial real estate, like owning other types of rental properties, is lucrative because your tenants are business owners and franchise owners that need space to conduct their business.
The pros of investing in commercial real estate include:
- long-term leases
- high rental prices
- value appreciation over time
The cons of investing in commercial real estate include:
- potential vacancies in the face of economic changes
- high upfront costs and potential difficulty financing
- high maintenance costs
If you’re looking for the security of long-term tenants and have the capital to make a large investment, commercial real estate may be right for you.
Investing in Residental Real Estate
Residential real estate encompasses any properties that are used for living purposes. This can include single-family homes, townhomes, condos, and multi-family homes (ie apartment buildings). When you own residential real estate, the goal is typically to sell it for a higher price or earn rental income by securing tenants.
The pros of investing in residential real estate include:
- the potential for lower upfront costs
- market-appropriate rental prices that will increase over time
- value appreciation over time
The cons of investing in residential real estate include:
- the potential for a high tenant turnover rate
- the potential for tenants who cause trouble or break the leasing agreement
- the need to attend to tenant’s needs or higher a property manager to do so on your behalf
Oftentimes, working in residential real estate is a personal business. The residential real estate market can be volatile but often produces high rental incomes or turnover prices. If you are willing to take on the work of keeping properties full and working with tenants or a property management company, investing in residential real estate could be the right choice.
Know Your Options With Commercial vs Residential Real Estate
If you’re considering investing in real estate, it’s important to understand the difference between commercial vs residential real estate. Now that you’ve read this primer, you’ve taken the first step toward making an informed decision.
Looking for more information about expanding your investment portfolio? Ready to start learning about property improvements? Take a look around as we share more valuable tips, tricks, and guides.
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