Whether you invest in Residential, Commercial, or industrial real estate, they are all great options! However, some key differences make one investment better for you than the other. As always it’s important to consult with a professional; however, In this article, we will go over the main pros and cons of each type of investment then wrap it up with key takeaways to help you get a jump start!
The first one on our list is Residential Real Estate, which would refer to a property where a person or family would live. Such as a condo or home. These make for great first time investors as they are looked at as the “easier” investment. Let’s jump right in!
Easier investment to maintain
Easy to resell if no longer interested
Generally lower cost
Able to use other peoples money via loans
Single income stream (unless renting out a multi-family unit
Vacant months you need to cover
Multiple streams of income
Vacancies are less of a problem since other units will be generating cash
Able to use other peoples money via loans (20%-25% down)
Lower mortgage interest rates
Responsible for repairs
Reselling (limited buyers in the market)
The next one is Commercial Real Estate, which would refer to real estate such as retail buildings, office buildings, warehouses, industrial buildings, and apartment buildings. These property types are generally a little tougher to maintain, but like everything in life, the more challenging it is, the more there is to gain!
Cash Flow ++
Generally, Tenants are serious and take care of the property
Less time spent since the property will close when the business closes
More room for negotiation when reselling
Lease terms and Lease prices are flexible
Higher initial investment cost
Lastly, we will be covering Industrial Real Estate, which would refer to real estate that is a large industrial property which is usually a warehouse used by third-party logistic companies (think amazon warehouse)
This types of investment have a tougher learning curve, but with the right professional they can make this a breeze!
- Different types like flex spaces, manufacturing, & distribution.
- Tenants are serious with substantial credit scores
- Longer Leases
- Less landlord responsibility
- lower Operating Costs
- A stronger investment that has proved to be recession-proof
- Online companies are leasing spaces up quickly
- Harder to re-lease when a tenant moves out since there are specific builds companies need
- Long term rental (no flipping probability)
- Single Tenants (Often)
- Good deals are tough to find
In conclusion, Even though real estate is an excellent investment, it is essential to familiarize yourself with each investment’s drawbacks and see what fits you best. Residential is the easiest, and anyone with the right mindset and limited knowledge can begin investing. Commercial real estate is glamorous and creates relationships and cashflow for you. Although with glamour comes problems over your area maintenance cost and possible vacancies from failed businesses. Industrial Real Estate is an excellent option if you are in the know-how. However, less glamorous, it yields superior returns and simplicity with tenants, which is sought after in any real estate investment. Whichever you decide, prepare yourself by seeking knowledge and speaking with professionals!
We hope you enjoyed this article and are ready to take the next step in real estate investing!