Five Major Differences in Buying Residential and Commercial Real Estate

Looking at commercial real estate listings for your next investment? If you have the budget for it, there’s  no reason why you shouldn’t consider investing in commercial real estate

Five Major Differences in Buying Residential and Commercial Real Estate

Looking at commercial real estate listings for your next investment? If you have the budget for it, there’s  no reason why you shouldn’t consider investing in commercial real estate

RECEP KARACA
RECEP KARACA
01 Mart 2018 Perşembe 16:36
102 Reads
Five Major Differences in Buying Residential and Commercial Real Estate

Looking at commercial real estate listings for your next investment? If you have the budget for it, there’s  no reason why you shouldn’t consider investing in commercial real estate. It can prove to be an excellent purchase that can pay for itself in the long run. However, the process is not as simple as buying a home.

Just how different is buying a residential from commercial property? Take a look:


You’ll Spend Significantly More Money on Commercial Real Estate


It shouldn’t come as a surprise that residential properties have lower price tags than commercial properties. The latter will be most likely located in a prime spot in the city and can also be way bigger than a house. This is why you should be ready to spend a serious amount of money.

Aside from the actual property value, the commercial property tax will also be much higher. You should allot a good portion of your budget for such as well. 

In many cases, you will need to enhance your space first before you can make money out of it. 


You’ll Need to Deal with Different People


While buying a residential property will also require you to have brokers and lawyers, it’s more important to find the right people when purchasing a commercial property. You need the right folks to help you make the right decision.

First off, you should stick with commercial real estate brokers. They know the ins and outs of the trade, so they’re the best people to work with. You should also have a real estate lawyer who is experienced in handling commercial properties so you can be sure to have all of your bases covered. An accountant and mortgage broker can also make your investment a lot safer so you should look into hiring them.


Having a Business Plan Before the Purchase is Essential


There are different types of commercial properties that you can choose from. You’ll find ones suitable for retail spaces, offices, etc. There are also industrial commercial properties and ones made for mixed development. They are available to you so you should know which one would work best for you. 

The type of commercial property you’re getting can define the kind of income-generating scheme that you can do with your investment. You can become a landlord to a single entity if you’re buying an industrial property or use it for your industrial venture. You can also become a landlord to several tenants if you wish.

The property’s location defines what type of property it is. You can find commercial properties for mixed development, retail, and offices in central business districts. Industrial properties, on the other hand, are often located in industrial zones.

You Have to Be Ready to Deal with Tenants


A common way investors make money from their commercial properties is by renting out the space in their buildings. If you don’t intend to use your property for your venture, you can always just get tenants and become a landlord. 

This business type comes with its risks, so you have to be prepared for it. If you’re leasing to businesses, you’ll have less to worry about as they will have to take care of their renovations and repairs. 

But if you’re renting out spaces as residential units, you’ll put yourself at risk of property damage and non-payment. You can’t evict tenants easily because of local laws, so you have to put a good vetoing system in place when finding renters.

Getting Financing can Be a Bit of a Challenge


Lastly, getting financing for commercial properties is not as easy as getting a loan for a residential property. This is why you’ll need the right experts to help you out so you can get out of this whole thing in one piece and a good property in tow.

While there are similarities in buying residential and commercial properties, there are significant differences that you should make sure to take note of. The ones we have listed here are just the most basic ones, though. You should do more research if you’re serious about investing in commercial real estate.
 

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