Friday, February 9, 2018

Commercial vs Residential Property: Which Is Better?

Most people agree that property investments are the best way to make money. Let
everyone else waste as much time as they want with things like Bitcoin that go up
and down like crazy. Put your money in property, and you’ve invested in something
that’s relatively safe, and gives you multiple ways of making money.

When it comes to property investments, a lot of people are in debate as to what type
of properties are the best; commercial or residential. Well, we’re going to settle the
debate by looking at each idea and seeing what’s good and bad about it. In doing so,
we can see which is truly better.

Residential Property

First up, let’s take a look at the big wide world of residential property!
What Is It?
Residential property pretty much refers to any building that people live in. Houses
are the most common property, but apartments, bungalows, and any other buildings
like this are also included. If someone can buy/rent a building to live in, then it’s
residential.
Pros
There are plenty of advantages to investing in residential property. The first is that
people are always looking for places to live. No matter where you go, there will always
be someone looking to buy a house or rent an apartment, etc. The demand for these
properties is high, meaning the potential to make money rises with it.

Secondly, residential properties offer you various ways of making money. On the one
hand, you can invest in a house, provide renovations, then sell it for a massive profit.
This is a very popular form of making money, and it’s called property flipping. On the
other hand, you can easily buy residential property and rent it out to potential tenants.
Both ideas make money, just in different ways.

Thirdly, a lot of residential property also comes with land attached to it. People have big
gardens or space outside their homes, and you can buy that with the property. In fact,
there are loads of house and land packages out there for investors to take advantage of.
The benefit of this is that you now have more land to do things to. You can build an
extension or completely do up the back garden, making the home more valuable and
increasing your chances of flipping it for a profit. Or, if you manage to buy a house that
comes with loads of land, you can build things on that land that make you more money.
I know people that invested in property on a farm or ranch, and it came with acres of land.
So, they built another house on their land and sold it to the highest bidder! You can’t really
get commercial property and land packages, so this isn’t a thing with them.
Next, residential properties are more readily available for investors. They’re easier to
find, there are more on the market, it’s just more convenient to invest in them
compared to commercial properties.
Cons
It sounds like residential properties are amazing, but do they have any drawbacks? Of
course, they do, nothing in this world is perfect! One of the key drawbacks with
residential properties is that you’re dealing with a very competitive market. Yes, having
lots of properties for sale means you have loads of choice when it comes to buying one.
However, it also means there are loads of other people trying to buy them too.
Commercial property investment is a much smaller world, with less competition.

Property flipping can make you a lot of money, but it can also be a bit risky. There’s
no telling what could go wrong during your renovations, meaning they may cost more
than you first anticipated. This could lead to you driving up the cost of your property,
making it harder to flip it for a profit.

On the whole, if you know what you’re doing, you can make a lot of money from
residential investments. They’re relatively safe, particularly when you don’t make
risky investments to try and flip them for a profit. But, what do commercial properties
have to say in response?

Commercial Property

We’ve seen what’s good and bad about residential property, but how do commercial
properties fair in comparison? Check everything out down below:
What Is It?
Commercial property refers to any buildings that people use for business or commercial
purposes. For example; an office, retail space, restaurant - anything someone can buy/rent
and use for their business.
Pros
A massive pro of commercial property is that they’re excellent for bringing in rental revenue.
This is the main way you will make money - you buy an office building, and you rent out
the offices to different businesses. You bring in multiple tenants all at once and have
different streams of income. There are always businesses looking to rent commercial
spaces, so you should always have a good time finding commercial tenants.

Another plus point of commercial properties is how easy they are to manage. Commercial
tenants are way less of a handful than residential ones. A family living in a home will
be there most of the time and have various demands. They could have issues with
their hot water, dishwasher, washing machine, fridge - loads of problems can occur.
Not only that, but families or individuals are more likely to struggle with rental costs.
They can easily dodge payments, put them off for an extra month, and just be very
difficult to manage. But, businesses are a different kettle of fish. There are fewer
problems that could occur, seeing as they don’t have bathrooms or kitchens - the only
main issue is electricity and their internet. They’re also more professional, and will
likely be able to pay rent every month. It’s much easier to manage commercial tenants
because they’re pretty much just like you - businesses trying to make money!

Thirdly, residential properties are more greatly affected by the property market. This is
because you tend to buy and sell houses more than office buildings. As mentioned,
the main aim of commercial properties is to make money through renting. Therefore,
if there’s a housing market crash, and residential properties drop dramatically, your
commercial property won’t be affected, and you can continue earning money.
Cons
Right, what are the drawbacks of commercial properties? Well, we already touched on
a few when talking about the positives of residential property. For one, you can’t really
flip a commercial property. Some people might be fine with this as they don’t like doing
this tactic anyway. But, there are groups of people that spend their whole lives making
money by flipping, which means commercial properties aren’t an attractive prospect
to them.

Secondly, commercial properties can be extremely expensive. Think about it, if you
want to get the most out of your investment, you have to buy an entire building. This
costs loads of money, potentially more than any house or apartment out there.

Thirdly, it’s possibly harder to find the ideal commercial property to buy. With houses,
there are loads on the market, increasing your chances of finding one that suits your
parameters. With office buildings/other commercial properties, your choices are limited.
There are nowhere near as many on the market, meaning you struggle to find one that
suits you. It could mean you spend months trying to find the ideal investment, wasting
time and money.

Commercial vs Residential: The Winner Is…

It’s hard to really decide which type of property is the best out of the two. I know it
sounds like I’m sitting on the fence, but it depends on the type of investor you are.
If you know the residential market, then stick to it. If you know the commercial market,
then stick to that instead.

Having said that, for beginner property investors, I believe residential is the way forward.
There are simply more options at your disposal, and some of them are cheaper too. You
can easily get your foot on the property ladder by investing in a small apartment, then
renting it out and taking things from there. It’s definitely harder for a beginner to find a
commercial property to buy.

The more your residential portfolio grows, the more money you start making. Now, it
makes sense to dip your toe in the commercial market after doing lots of research.
It’s a smart way to diversify your assets and broaden your property portfolio.


So, in conclusion; residential property is an excellent starting point, while commercial
properties can come in handy once you’ve already enjoyed success. The main thing
you can take away from this article is that the real winner is real estate. It’s so clear
that property investments, on the whole, are the best way to make money. The simple
fact you have two different categories - both with subcategories too - shows the variety
at your disposal. There are loads of options out there, and it’s still much safer than
investing in volatile stocks or other assets. So, if you’re keen to set out on an investment
journey, this is the perfect starting place.

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