Investing in real estate is a great way to make money, but you must know how to pick the right properties. If you want to start investing in real estate, you can purchase residential properties or commercial properties. Which is better? Is there a difference? There are some differences between owning residential and commercial properties, and here are several things to consider as you decide which type to purchase.
The Differences in Property Usage
The first thing to understand is the differences in the usage of these types of properties. Residential property has one primary purpose—it provides places for people to live. People live in homes, apartments, and other structures, but the property is always residentially zoned. When you own residential properties, you rent the units to people who need a place to live.
Commercial properties have a different purpose. When properties have commercial zoning, you can only use them for business purposes. You will find different commercial zoning types, but all commercial properties serve the same purpose. When you own commercial rental properties, you rent the space to businesses.
The ways people use these property types are different, but that is not the only difference. You will also find cost differences between residential and commercial properties. Most commercial properties cost more than residential properties. The price difference is often due to the increased amount of space you find in commercial buildings. It might also be a result of the location of the properties. You will likely need more money down to buy commercial properties, as they generally cost more.
Other Features to Compare
As you compare these options, you might want to know a few more differences. The first difference is the length of the leases you get with residential and commercial properties. Landlords typically rent homes and apartments through one-year leases. When renting commercial properties, landlords might require three- to five-year leases.
Secondly, the amount of rent you charge is higher for commercial properties than residential ones. Therefore, you can earn more revenue each year from these differences.
One other difference is with the amount of maintenance the properties need. You can require commercial tenants to maintain the space themselves, whereas you cannot do this with residential properties.
Purchasing commercial properties might cost more, but they can provide a higher return for your money. If you have questions about residential or commercial real estate, contact a local real estate office or a commercial seller.
Welcome to my website. My name is Larry Silva, and I want to talk a bit about private mortgage insurance. You may have heard the term PMI mentioned when you were in the process of purchasing real estate. When I first heard my lender talking about PMI, I was very confused. It was my realtor who sat me down and explained what private mortgage insurance was and when someone is required to purchase it. He told me that PMI is not lifelong insurance; it can be cancelled when the mortgage principal balance reaches a certain point. Once it was explained to me, private mortgage insurance was no longer a mystery or a confusing concept. I would like to pass on what I learned and hope that you find it to be of value.