In the aspect of real estate investment, investor wanting to invest would basically choose between a commercial estate and residential property. Individuals who are keen with taking risk, the ideal option would be the residential properties. On the other hand, people who are willing to risk more for greater profit would likely choose the commercial properties.
However, aside from the risk and profit considerations, it is also important to at least have some basic understanding on the differences of both dealings. Now here below are some of the basic differences as ascribed to the two types of real estate, as also seen via propertycluster.
Definition
In general, commercial real estate refers to properties such as land and buildings that are intended to gain profit for the owner. Thus one may also say that residential houses which generate profit through tenant's rent could be considered as a commercial property. However, the term commercial property for most of the time is used as reference to buildings that are utilized as offices, stores, shops and storage.
On the other hand, the residential estate suggests single-family or other forms of rental units, according to propertycluster. Condos and coops where landlords mostly invest are included in the said category, as well as house flipping.
Revenue and Challenges
One key feature that distinguishes a commercial property from a real estate property is its possible high revenue. However, though commercial property is a high income generating property, challenges like getting loans from financial institutions are proven to be more difficult compared to a residential property. A commercial property for most of the time is in a risk of having a high rate of vacancy, but still if you know how to market and manage the property, it still has a greater scope for profitability.
In contrast to commercial property investment, a residential property will not yield much revenue. However, the interest of an investor lies in the fact that one's a residential house has been restored or flipped, finding tenants would not be that difficult. In sense it has a low rate of vacancy as compared to a commercial property. And when it comes to maintenance, the residential ones are easy to handle compared to the commercial ones.
Overview
Though there are advantages and disadvantages concerning both possible investments you may choose, still the decision would be anchored on your capacity to take risk. If you wanted a higher profit, then it would be logical for you to choose the commercial property. However, if you are not that certain enough, then you may be inclined to choose the residential ones which by far have greater demand compared to its supply.
