When thinking about investing in real estate, there are two main options to choose from: residential properties and commercial properties. Although investing in residential properties is usually the way to go for many people, the booming commercial real estate industry and it wide and compelling marketing strategies are starting to make their mark on investors.
Because of this, many people are finding it difficult to choose which of the two they should invest in. In order to make the process easier, it helps to know the different pros and cons associated with investing in either of the said properties.
Cost of Investment
Investing in commercial properties is generally more expensive than investing in residential properties. However, this still depends on several factors like the location and size of the property. You will find that a large residential property in a high-end subdivision can cost just as much as a small commercial property in a not-so-well-known business district.
Return on Investment
The ROI for commercial properties are also generally higher than in residential properties. This is because there is potentially more means of earning with the former than the latter. For instance you can rent out an office space or property much expensively than you would with a residential estate. In addition, the appreciation value of commercial properties tends to be higher and rise faster.
Investing in a commercial property or residential property does not come without risks. However, the risks tend to be higher with commercial properties. For instance, there is the problem with long-term vacancies, due to difficulty in finding businesses or firms who are willing to rent your commercial property. When businesses fail, you may find that those renting your commercial property may be unable to pay you.
All in all, investing in a commercial property may seem more appealing than in a residential property. However, the risks involved are relatively higher. The most important thing to consider though is how you intend to make money out of this investment. If you want to rely solely on land appreciation and do away with the risks associated with rents and leases, you may want to consider investing in residential properties. However, if you are brave enough to face the challenges and risks of owning and managing a commercial property in exchange for the possibility of higher profits, then commercial properties are the better choice.