The Better Investment - Commercial or Residential?
By:
Corey Dample
Real estate investment has grown with the last couple of decades and real estate giants like Trump and Branson have made incredible amounts of money because of real estate investments. Just by reading about Trump's, Branson's and any other real estate mogul's success stories, people have slowly made their way into real estate investments; sometimes with no clear goal or idea on what real estate investment is all about.
Now, there are two kinds of real estate investments that people can take advantage of: commercial and residential. Both of these investments are good in their own way; not to mention that it's a common misconception among first time investors that you can only invest in residential real estate.
Even though residential real estate is considered to be a starting point for future investments, commercial real estate investment still has something up its sleeves that residential real estate doesn't:
1.) Commercial real estate capital is a lot easier to generate: I have come across various investors who found it easy to come up with $2M worth of capital for commercial real estate than a $100,000 capital for residential real estate. This is because residential real estate financing relies on traditional financing and it would force you to be more creative in acquiring the finances for the property like leasing. Commercial real estate, on the other hand, have access to more financial options like partnerships, hedge funds, REITs, equity firms and the list can just go on.
2.) Commercial is less competitive: A lot of investors target residential property owner. In other words, residential real estate is so competitive; you can practically see HOUSE FOR SALE signs on every corner. But if you were to apply the same marketing techniques to commercial properties, you'll find that you're going to be one of the very FEW people who are going to contact the owners of the property.
3.) Commercial real estate appreciates without the competition: In residential real estate, the value of a property appreciates or depreciates according to its competitors; meaning a 3 bedroom, 2 bathroom house will have a value of $100,000 and has a bigger chance of affecting the prices of its other competitors. For commercial real estate, properties have higher values according to the income it generates. This is referred to as FORCED APPRECIATION: the more you find ways on how you can make your commercial property make money, the more valuable it becomes in the near future.
But don't take my word for it; consult with your local real estate agents on which kind of investment would suit your financial needs. Not everyone can afford to invest in commercial properties on their first purchase so you may want to take it slow; remember, you can't be broke and greedy at the same time.
