Finding Ways To Keep Up With Homes

Demetrios Salpoglou: What are the Differences Between Residential and Commercial Real Estate Investments

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. A great way to balance your portfolio as a real estate investor is investing on commercial real estate properties. 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. Diversify the risk of real estate investments by investing on commercial properties. For example, if you have an apartment building and you lose three of your 15 tenants, then you only lose a portion of the income instead of losing the entire rent as you would 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. Because commercial property leases are generally much longer than residential leases, this greatly helps with your cash flow’s stability. Banks and other financial institutions value commercial real estate properties differently, needing higher down payment than residential properties.

Before investing on a commercial property, it pays off doing your homework by finding 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 former management? Are the businesses booming? Are there any residential properties currently 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 for the cash flow of the sellers or tenants in the commercial property. 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? It must be the right time to start owning a commercial property. There are really many benefits owning a commercial property that you cannot obtain by owning a residential 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.

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