Will You Invest in Residential or in Commercial Real Estate?
Real Estate is divided into two branches; the residential, and the commercial real estate. They are like two sides of a coin. Thus, investing in one side of real Estate is complementary rather than competitive to investing on the other side. This is because, people cannot work in offices without living in houses, vice-versa. Making up one’s mind on what branch of real Estate to invest in is hard work.
Real estate development, or the process of land development to construct commercial and residential buildings, shapes tomorrow’s urban scene. This is because real estate development governs future land-use and the associated spatial distribution of jobs and houses. As such, it provides public planners with an instrument to steer urbanization.
Residential Real Estate
Basic residential real estate investing includes buying, rehabilitating and selling homes. The real estate market is composed of buyers and sellers, but there are many reasons people buy and sell real estate. Some people do it as an investment pursuit. Active investing in real estate, however, can be done in several different ways, though most investing involves either residential or commercial real estate. Additionally, differences exist between commercial and residential real estate investing and each comes with its advantages and disadvantages.
Investing in the Residential
Relatively low start-up costs makes it easy for almost anyone to go into residential real estate investing. If you’re investing in residential real estate to flip it, you make your income on the profit margin between your purchase price and your sale price. However, many people buy residential real estate and become landlords because it’s relatively easy to find paying tenants. On the downside, residential real estate investing may mean you’ll be experiencing landlord property management responsibilities, deadbeat tenants and other issues.
All single-family type homes and one-to-four-family rental residences are considered residential real estate. Condominiums and cooperative units are also included in the residential real estate category for investment purposes. Many people invest in residential real estate by buying homes or similar rental properties and then becoming landlords or even house “flippers.” Flipping a house is simply buying it at a low price and selling it at a higher price, usually after fixing it up a bit.
Commercial Real Estate
Commercial real estate is generally land or buildings intended to generate a profit. Commercial real estate is frequently referred to as investment or income property. Commercial real estate also includes rental residences or properties housing five or more units. However, most commercial real estate is office and retail space and industrial-type buildings. Commercial real estate investing tends to draw in people with much money and business experience or education.
Investing in Commercial
In commercial real estate, you generally buy likely revenue-generating properties and make money off tenants’ long-term leases. Commercial real estate investing, though, typically involves much higher start-up costs than residential real estate investing because commercial properties are pricier. Also, you usually need deep-pocketed investor-backers or lenders in commercial real estate investing. Banks can be difficult when giving commercial property loans. However, commercial properties, if bought and managed or sold smartly, can generate significant revenue or sale profits.
Depth of Involvement
Your required depth of involvement in real estate investing depends on whether you intend to flip the property or become a long-term investor or landlord. Many house flippers are buying homes, fixing them up on weekends and then reselling them. Commercial real estate investing itself can be a bit exotic, with purchase and leasing deal language that’s equally exotic. Though it usually requires more hands-on attention, residential real estate is easier to not only finance but also to manage.
The world is fast developing and there is a trend that people love to play and work in the same area. So, whatever parts of the market you choose to invest in will always be a win-win investment.