Benefits and Risks of Investing in Commercial and Residential Real Estate
As real estate developers, we take into account differences with commercial and residential real estate when building or renovating. With 350 Goose Lane Office Park development, we work to develop commercial office space that can be built-to-suit, while incorporating top of the line features and plenty of green space. At The Residences at 66 High Street, we focus on luxurious amenities and convenience for residents. Differences between commercial and residential do not stop with the development – there is also a lot to consider as an investor. We outline some of the key benefits and risks below.
Commercial Properties – Potential Benefits & Risks
If you have the funding and experience, there are a handful of potential benefits to investing in a commercial property.
- Longer leases, generally ranging between 3-10 years, provide more stable income.
- Less maintenance for the owner, developer, or property manager, assuming net lease agreements are in place.
- Strong returns in the form of income and capital growth.
Commercial real estate ventures also come with potential downsides. Because commercial properties are pricier than most residential properties, they often require higher start-up costs. Also, finding tenants for open space can be difficult, particularly in a poor economy.
Residential Properties – Potential Benefits & Risk
Whether flipping houses or investing in large multi-family properties, residential real estate can be a great investment medium for individuals from all income brackets. The potential benefits include:
- Lower start-up costs, whether you are buying a one family or multi-family property.
- Easier to finance, with mortgage options for every type of buyer.
- Tenants found faster, compared to commercial tenants.
While one can flip a house and put it right back on the market, being an investor or landlord in a residential property requires a great deal of involvement. In regards to property management, residential buildings require far more active participation than commercial properties, as lease agreements tend to take responsibilities out of tenants’ hands.
Investing in real estate can be a great way to diversify your investments and can also be relatively risk-averse if you know what to expect. Before committing to a commercial or residential property, it is important to understand what is required and what suits you best.
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