If you’re confused about whether to go for residential real estate or commercial property for your investment vehicle, there are certain factors to consider. Let’s have a look at the differences between the two properties so that you can be better informed of your expected cash flow and property management:
Commercial vs. Residential Real Estate Investing
Before we delve into the differences between commercial and residential properties, let’s define the two separately to get a better understanding:
About residential real estate
Residential real estate is the name we give to any kind of complex that has anywhere between one to four units. These could be condominiums, single-family units, duplexes, triplexes, and quadplexes.
Basically, residential properties or residential real estate is the kind that’s meant solely for living in. It’s meant to house families, roommates, couples, or even single people living alone. In a nutshell, this is the property that people would call ‘home’. This sets them apart from commercial real estate like hotels, etc.
If there’s any instance of commercial activity within residential real estate, this would usually be a violation of the local zoning ordinances.
The pros and cons of residential properties
Below, we’ll be considering the nuances of investing in residential real estate. This will give you an idea of which way to go when you’re building up your investment portfolio:
Pros 1. A lower barrier to market entry
When you compare residential properties to commercial or other kinds of real estate, there’s quite a lot of choice available. The supply of houses is high, so the price naturally decreases. This is why residential real estate is currently among the cheaper types of real estate to invest in.
With the lower price, entering the residential property market will be easier for investors.