Investing, 770 Capital Investment Group

The Pro’s and Con’s of residential, commercial, and industrial investing

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!

SINGLE FAMILY

Pros:

Easier investment to maintain

Easy to resell if no longer interested

Generally lower cost

Able to use other peoples money via loans

Tax deductions

Cash Flow

Cons:

Single income stream (unless renting out a multi-family unit

Tenants

Vacant months you need to cover

MULTI-FAMILY

Pros:

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

Tax deductions

Cons:

Responsible for repairs

Multiple Tenants

Learning curve

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!

Pros:

Cash Flow ++

B2B relationships

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

Cons:

Maintenance Costs

Full-Time Job

Higher initial investment cost

Higher risk

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!

Pros:

  • 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

CONS:

  • 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!

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