When to Invest In Commercial Property vs Residential
Real estate investing is a great way to create generational wealth for your family. Most all properties can be classified into two categories, which are commercial property and residential. Knowing when to invest in each type is a necessary skill for any investor to learn. When you are choosing a location for an investment property, there are a number of factors to take into account. Families can be stable and reliable tenants for investment properties. Finding a great investment property can be made easier with some professional assistance from an experienced real estate broker.
You Have Many Backers
One of the biggest barriers to entry when it comes to commercial property is the high purchase price. However, if you have many backers who are willing to go in on the purchase with you, it’s a good idea to opt for commercial real estate. This is because a commercial investment will lead to more rental income than a typical residential investment.
When You Want to Diversify
When it comes to creating wealth, diversification is key. If you spend most of your time investing in residential real estate, you can work to diversify your wealth portfolio by investing in commercial properties. A property investment advisor, like those at Algorithm Consulting, Inc., can assist you in determining what type of commercial property will best fit your investing portfolio.
You’re Looking for a Bigger Payday
Collecting rent from 20 tenants is obviously going to provide you with more income than renting to 1 resident. Commercial real estate investing is perfect for those who are looking to gain a bigger monthly payday from their investment. It’s important to realize that with a bigger property comes more maintenance and costs that you’ll need to factor into your revenue to ensure it’s worth the investment for you.
You Want More Stability
Residential real estate is less time-consuming in regards to keeping track of tenants and collecting rent. However, when you’re only renting to one tenant, you have a much higher risk of losing that income. This could be that the tenant stops paying rent or they move out. When you invest in commercial real estate, you can enjoy a lower risk of not being paid rent. Even if some of your units are empty, you can rely on the income from the ones that are full to provide you with much-needed income.
Both residential and commercial real estate have their place in your investment portfolio. While it’s highly likely that you’ll predominately stick to one investment type, you’ll definitely want to know about the other. The more you learn about different types of real estate investing, the more you open up your investment possibilities to grow your wealth. If you are looking to attract tenants to your investment properties, there are few things to take into considerations before choosing which ones to invest in.
For young families, it is often important to be close to the local schools so that they can easily commute to school and make local friends. If you are interested to know whether the areas you are looking at have any draw card schools, check the government’s school website. You can often find great schools close to the areas you are looking at and then aim to buy a nearby house which should be easy to rent to parents who want their children to attend that school. In fact, a good local school can underpin growth in housing prices in areas, with some schools commanding a rental premium depending on whether the home is within the school catchment area.
A larger family will usually require at least a three-bedroom house to offer rooms to the parents and two children, but with fewer children sharing rooms it can be attractive to families to have four or more bedrooms. In this case, each child can have their own room with potential for rooms to be used later as studies or guest rooms. Generally speaking, larger houses are better than smaller ones to attract families as renters.
If you are investing in commercial property, choose layouts that can accommodate small to mid-sized companies with plenty of space for desks or cubicles. A partitioned building can work well if you are looking to host multiple tenants.
For families with young and energetic children, it can be useful to have a large yard with room for a trampoline or to kick around a ball. Look for yards with open spaces rather than manicured gardens with high upkeep and little usable space.
If you are investing in commercial real estate, landscaping still matters. Choose something easy to maintain with native plants that are more likely to hold up through each season. You want an inviting property from the outside as well as the inside.
Neighborhood and Location
Location for an office building or retail store is key to getting and keeping commercial tenants. You want to be located in a populated area with plenty of public transit options nearby.
For residential buildings, families often enjoy neighborhoods with playgrounds and parks that can be used for social catch ups and after school play dates. Try driving around the area you are looking at for your property investments on Friday and Saturday nights to see if they feel safe and look at whether the local play equipment appears clean and well used or damaged and graffitied. The overall community feel, and closeness of the local neighbors can help attract and maintain great tenants in your rental properties.
Now that you have these tips in mind, go forward with your property investment goals confidently.