Commercial Investment Better Than Residential Investment

Commercial Investment Better Than Residential Investment

As the Winston Churchill says “Land monopoly is a not only monopoly, but it is by far the greatest of monopolies; it is a perpetual monopoly, and it is the mother of all other forms of monopoly.” Mastering the art of real estate investments can lead to a wealthy and better lifestyle.

The topic of real estate investments has always been under discussion since the people started buying Properties for earning money. All that matters is what kind of Property you would like to buy. You have two options to choose from commercial investment and the residential investment. The commercial Property may include retail, industrial, office buildings or apartments with more than five units. On the flip side, Residential Properties comprise of regions, which people choose to live.

Before buying a Property for an investment, it is better to have a clear picture of ins and outs of the real estate investments. I personally advise commercial investments. I have listed out the reasons to go for commercial investments to help you decide.

Rational Investment & returns: Commercial investment should be bought & sold/leased with rational mindset. Hence, the transaction is hassle free.one wants to earn the benefit of the premises, the other wants to operate and make the best use of it.

Positive NOI: NOI stands for Net operating income. It is typically the value you get after subtracting operating expense for the first year of buying the property from the gross income of the property’s first year. Only commercial investment can give you this value positive, as the gross income would be high as against the residential investment.

High CAP rate: Capitalization rate is used to calculate the net present value of the future cash flow and the profits. Capitalizing the earnings would indicate the estimation of the value of income producing properties. In Residential investment, no incoming cash flow is expected.

The abundant market for good: The commercial properties can be the best market for the good as opposed to the residential properties. The business requires a market, and in order to earn money; the commercial Properties are the most suitable.

Affordable management: Management of commercial properties after the investment is way comfortable than the residential one. The reason is that the commercial properties function only in the working hours. So no extra time would be required to keep an eye on your Property during midnight’s or weekends. A residential property may demand surveillance at any time.

Open playing field: The key players in real estate know this really well. The commercial property is a playing field, which can experiment with various kinds of businesses in demand. The residential property can only be used for single-family homes.

Low insurance expense: The real estate properties are prone to natural disasters such as floods or earthquakes. But the residential insurance would be higher as compared to commercial property insurance.

Additional cash flow: The tenants and Property owners are already on board in commercial investments. Also, the income in commercial real estate is directly in proportion to the usable square footage. This is not the case with the residential investment, as it would only give fixed income. The commercial properties can be modified and sold according to the need and hence the variable prices lead to additional cash flow in such investments.

Professional customers: The customers of your commercial properties would be very professional and courteous in terms of relationships. They are always under inspection and they want to sustain their reputation in the business. So, they always maintain the property well and are less prone to crisis as compared to residential customers who might not maintain your property that well.

Conclusion

The bottom line is that the government and the banks treat the commercial properties differently in a good way. One can dream of earning income through renting, price appreciation or leasing the commercial property. They are best for the first time investors who want to learn to cover the mortgage payments, taxes, and other expenses. So, as the earning potential in commercial investments is higher, which is the basic motive of making an investment, the smarter move is to go for commercial investments. And the make the process of researching the places less daunting, one should take the advice of real estate bird dogs.