You’re weighing your options and considering investing in real estate. Real estate investing remains an extremely lucrative field but understanding where and when to invest is crucial to your success.
Those who consider real estate investing know that it’s a great way of obtaining passive income while utilizing their business connections to bring in an additional source of revenue. So, whether you want to invest in a commercial or residential property depends on your personal preference, and whether or not you’re already a small business owner.
The most attractive feature about rental properties is the fact that you can diversify your income through increasing the value of your potential property over time (providing you make the wisest choice)
Before jumping in and running with real estate investing you should be aware of the key differences between commercial real estate and residential.
After reading this blog you’ll be able to move full force with real estate investing since you’ll know the difference between commercial and residential investments.
Should I Invest in Commercial Real Estate?
Think of commercial real estate investing as a business investing or obtaining property from a small business that is looking to sell their company. Commercial property is generally defined as property such as a hotel, with multiple units. Even the smallest businesses have commercial property even if the business only has two rooms and one main entrance area.
The largest benefit to commercial real estate investing is the ROI or return on your investment. Both your income and equity are much more likely to increase over time.
As an investor, you should also know another benefit. The length of time of business (commercial) leases tend to be much longer than residential real estate. For instance, you can expect for a small business lease to run for at least 5-10 years in comparison to the 6-12 month leases you see with residential properties.
Can I Invest in Residential Real Estate?
Residential real estate includes homes and duplexes in which a single-family will live. The good side of residential real estate is that everyone needs a house, unlike a business. As mentioned these leasing terms usually go anywhere from 6-12 months.
You’ll find that you can avoid problems such as zoning laws and regulations when dealing with residential properties. Commercial properties tend to have more strenuous regulations but with the help of an experienced broker, you can accomplish your investing goals.
In the event of the economy falling such as the 20’s, residential properties won’t fall as quickly as commercial. This is obviously because people will want to pay for and keep a house over a small business.
How Long Have You Been a Broker?
After understanding the differences between commercial and residential real estate you can dive into why you should hire the broker you’re considering. Where are their testimonials? How long have they been in business? What is their process?
Understanding the expertise level of your broker is crucial to establishing a foundation for your investments. For the most part, you can do your research and look up their local licensure to ensure you’re working with a credible professional.
What Are My Account Minimums and Fees?
Most times your finances have to be in order prior to investing or obtaining property whether it’s residential or commercial. Be open with your broker and ask them about their fees and minimum account balances so that you aren’t shocked in the long run.
Depending on the broker you’re considering doing business with you may have a high-level account balance required to proceed. Think of this as protection for both you and the broker. Don’t feel too discouraged at this news, there are brokers out there with lower minimum account balances so you can achieve your goals.
*Be sure to ask your broker how much their additional hourly rate is in the event that servicing you goes over their allotted time.
What Does Your Broker Compensation Look Like?
So, we’ve covered residential and commercial real estate, minimum account balances and fee’s, now it’s time to ask your broker what their compensation plans look like. This may seem like a difficult question to ask but it is an important one. You need to know this information upfront so you can see how much will be paid or taken out of any accounts and agreements you have with the brokerage of your choosing.
|For more information and commercial or residential real estate give us a call so we can help you accomplish your real estate goals
Keith McLaurin | Licensed Commercial Broker ID#01190109 / NMLS#1209195