Residential vs Commercial Real Estate Investing: Which Is Better?

Real Estate Investing

When many regular people think about investing in real estate and becoming a landlord, they often just think of buying a house or condo and renting it out to tenants. However, that isnt the only possibility for investing. There is a whole world of commercial real estate that could also make a great investment.

It takes a little research and making a comparison between the two to understand which one is right for you. In this article, we will go over a few things to think about to understand which one is going to work best.

Residential real estate pros

There are some advantages to buying up residential homes for sale in Toronto ON, for example, over a commercial property.

For starters, there is a great deal of familiarity with the process. If you are a landlord then you likely already own your own home. Youve gone through the process at least once and pretty much know what to expect. The paperwork is straightforward and easy to understand.

Commercial real estate may seem a lot more complex and complicated and can be off putting. Commercial property could be a strip mall with multiple businesses in it. This will be a long and complicated process that may not suit your needs.

Residential real estate is also usually much less expensive than commercial. A commercial residential building will have multiple units and be far more expensive than buying up a single unit to start with. Anything commercial is usually larger and costs more to buy.

There is also less risk associated with residential properties in general. You are also able to work with short leases. In some cases, just a year. If you have a tenant causing problems then it can resolve itself quickly with a short lease. Commercial real estate carries more risk since the leases are longer and the process is more complex.

Commercial real estate pros

Although there is a learning curve that comes with the territory when you buy commercial real estate, if you already own property it shouldnt be too difficult to manage. It could be worth it for the advantages you get with buying commercial properties.

The most obvious advantage of buying a commercial investment property is how much money there is to be made. Since these types of properties are providing income for the tenant, you will be able to command more money than from a residential one.

You can even save quite a bit of money over residential properties since there are a myriad of tax breaks and incentives that come with this type of investment. Its also a great hedge against inflation as the rents are usually higher than average and provide a buffer when inflation rises.

Lastly, you have a lot of leverage when you own a commercial property and can take loans for cash to buy more property. Youve essentially increased the buying power of every dollar you spent on the commercial investment.