Choosing Commercial Property Over Residential Property For Your First Investment

People who have finished their mortgage plans or have put it under control almost always look through real estate as a prospective investment

. A property is always a good investment because, given enough knowledge and some expertise, you can vouch for success. Properties are solid and are almost always appreciating. So when it comes to putting your hard earned money where it has the potential to grow, property investment almost always comes to mind.

For those who are still new to real estate, the first thing they think about when you say property investment is buying a residential property, a rental property or a flat, which they can make money of. It is quite easy to manage, does not require much expertise in real estate and renting residential properties, demands a pretty low investment, and provides a very good promise of ROI (return of investment) in such a small period of time.

Another good advantage at going for a residential investment is that, even when the market is tough, it would not be too hard for you to find tenants. There are a lot of people out there who needs shelter. If you want them, all that you need to do to get them renting is to negotiate your rent. During such hard times, your income might go slower but there still is an income to speak about. In case of a commercial property, your choice of tenants are quite few and far in between. When the market is tough, you get a very low chance to zero of getting one rent your space.

Why Buy a Commercial Property?

Then again, there are also advantages that making a commercial property investment brings about. First of all, there is the potential of getting a higher ROI. In a residential property, the maximum ROI is only at 7% but in a commercial property, it is at 12%. The 5% difference is a big one since we are clearly talking about big money here.

Another good thing about a commercial property is that, your tenants are bonded with a longer term contract. The formality of leasing your property gives you enough security that your space will be occupied at least for the full length of the term. There is no need to scout for tenants every so often.

With commercial properties, minor repairs are covered by your tenant. You will not be called for every leak, every small hole, or every subtle crack in your property. The company leasing it will take care of that alright. Also, all that you are responsible for is the exterior of your commercial property. The tenants usually take care of how the interiors would look like. Maintenance costs are usually less because it is mostly functional rather than decorative.

Buying a residential or commercial property has its own set of advantages and disadvantages. It is really up to the investor to choose what he thinks he can afford. If you are taking the big leap and you have the budget to start it, a commercial property is definitely a more promising investment.

by: Beverly Manago

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