While most small investors tend to go straight to residential property when wanting to make some kind of real estate investment – probably because they are more familiar with the market – sometimes commercial property might be able to provide a better return. Consider these advantages and disadvantages of commercial and residential properties for investors:
- Commercial properties tend to have much longer leases – perhaps even as long as ten or twenty years – whereas residential properties are likely to lease for just one year or less. This kind of stability can be a great asset.
- Banks are less likely to lend you money easily for a commercial property because it’s more complicated – so if your credit is not too great, investing in residential property might prove easier.
- Once you have tenants in a commercial property, you can be fairly sure they will take excellent care of the property because it is the front for their business – if it looks bad, it’s bad for business. Residential tenants are not always so careful.
- It can be a lot more difficult to find tenants for a commercial property, because of course the market of people seeking it is considerably smaller.