A residential property is one that provides an income to the owner from apartment buildings, co-ops and houses. Commercial property is the term that is used to describe non-residential properties that provide an income such as office buildings, retail space, industrial businesses and other non-residential properties. You will discover that there are several advantages and disadvantages to investing in either.
The Pros And Cons Of Residential Investments
You will come across several advantages to investing in residential properties, such as:
• The great demand for rental homes means that you will have a vast selection of tenants to whom you can rent.
• You have an opportunity to earn a substantial and consistent income by renting houses and multi-units.
• It is somewhat easy to finance residential properties and may replicate home financing.
• Residential properties are somewhat less expensive to purchase than commercial properties.
• You can reside in a multi-unit property and act as building superintendent.
Likewise, there are also a number of disadvantages to investing in residential properties, such as:
• You are required to take care of all maintenance and management issues on a regular basis if you invest in a residential property.
• If you only have a single unit to rent, if the tenants fail to pay or the property is vacant, there will be no income from the property and you may lose money.
• Repairs are necessary quite often in residential properties.
• Disputes involving tenants in a residential property are harder to solve and specific regulations must be followed.
The Pros And Cons Of Commercial Investments
Just like residential investment properties, commercial investment properties also have several advantages, such as:
• Commercial properties typically carry long-term leases that provide a stable and consistent income.
• Property management is less demanding with commercial properties, because the majority of the time the lease agreement states that the tenant must take care of maintenance and repairs.
However, commercial property investments also come with a few disadvantages, such as:
• It is more difficult to obtain financing for commercial properties.
• Commercial properties can be harder to lease and may be vacant for extended periods.
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Great itemized list of pros and cons. A post that must be shared.
Hi Sean,
Thanks for showcasing the pros and cons of investing in residential properties and having commercial investment strategies. I’m thinking that you’d need both to diversify your interests.
But, is it better to stick to either one or the other and work on making money using the strategies that suit each one?
I didn’t realise that it was harder to obtain finance for a commercial real estate invstment, I wonder why that is? Like others have commented, I also liked the itemized list of pro’s and con’s for both residential and commercial properties.