Partnership for the Good of Your Business

How does commercial and residential real estate differ?

On Behalf of | Jul 26, 2022 | Real Estate |

Commercial and residential real estate both have different things to offer. If you have an interest in getting into real estate, you may change your mind on which to go for depending on several factors.

Of course, before all else, it is important to make sure that you go for an option that suits your goals, limitations and toolset best.

Pros and cons of commercial real estate

Leverage discusses the differences between residential and commercial real estate. Generally speaking, commercial real estate has high risk and high reward. It has higher barriers to entry and has more dependence on the economy’s health, which means you may take a bigger risk with investments.

However, the people who rent commercial properties tend to be higher-quality tenants. They also have fewer obligations, which means less of a chance for conflict between the two of you.

On top of that, commercial properties tend to have longer-term leases, higher returns and also have easier ways to increase property value over time.

Pros and cons of residential real estate

On the other hand, residential properties have a much lower barrier when it comes to entry. It takes less research and money on a whole to invest in residential properties. They have an economic sturdiness that is hard to beat, as everyone needs a place to stay even during turbulent economic times.

However, they tend to have a higher turnover rate of tenants and less cash flow. On top of that, the value greatly depends on the neighborhood the property is located in, which you have no control over.

Based on these factors, you can then decide how to proceed with your first purchase.


FindLaw Network