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Commercial and Residential Real Estate Investment

Why It’s Important to Know about the Commercial and Residential Real Estate Prior to Investment?

March 1, 2017

If you are looking for investing in a property with great returns and calculated risks, then it is important to know the difference between residential and commercial real estate investment. Before settling down with the pros and cons of both these options, it is necessary to understand which property can be classified as residential or commercial:

  • Commercial real estate: These include all kind of non-residential buildings that are solely meant for business purposes such as offices, factories, medical centres, hotels, malls and garages.
  • Residential real estate: These generally include apartment buildings, housing complexes and cooperative units that are usually purchased by the individuals to satisfy the needs of their families.

Thus, a commercial real estate is business focused while the residential real estate revolves around the wants and desires of a homeowner and his family. Commercial ones are used as an investment to achieve an anticipated rate of return on the funds that you have invested while residential property is purchased only for individual use, mostly to provide housing for the families.

Moreover, commercial real estate agents are quite different from the residential ones. The selling of a commercial property usually takes much longer than that of the residential property. Thus, the commercial agent is expected to have a large amount of financial information and analytical data and he would benefit by having the business contacts as it takes long time to make clients.

It is considered that residential real estate is much better investment option than the commercial real estate due to following reasons:

    • Financial advantages: If you are looking for the loans from the banks or the financial institutions for residential real estate, then it is much easier and requires lesser paperwork than the commercial real estate. Moreover, the loans for commercial real estate include higher interest rates.
    • Steady income: Indeed, there is always a growing demand for the rented houses while looking for a suitable tenant for commercial property is a time consuming process.

 

Thus, it is imperative to know about the pros and cons of both the types of real estate and then go for any investment.

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