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Demetrios Salpoglou: What are the Differences Between Residential and Commercial Real Estate Investments

Many of us are accustomed to buying residential real estate properties, but investing in commercial real estate is actually the better way to gain higher return on investment. Even if you already have residential estate investments, having commercial properties can help in balancing your portfolio. Get ready for a primer on buying income-[producing commercial estate properties by knowing all the rules and term when it comes to commercial real estate investments. Allow us to share with you some insights regarding the differences between residential and commercial real estate properties.

Unlike the income you can generate from residential properties, the value of commercial real estate properties is directly related to the usage square footage. Commercial real estate properties can help in diversifying the risks. For instance, if you own an apartment complex and you lose two of your 20 tenants, then you only lose a portion of the income instead of the entire rent as you would lose in a single-family residence. There is a greater cash flow owning a commercial real estate property because you lease per square foot and so you generate more income than what you can get by owning a single family dwelling. Commercial real estate property investments provide more stability on your cash flow because their leases are generally much longer than residential leases. Banks and other financial institutions value commercial real estate properties differently, needing higher down payment than residential properties.

Before investing on a commercial property, it pays off doing your homework by finding out the vacancy rates of previous owners and talking to storefront managers to find out what they like and about their business. Are they still planning to renew their leases? What did they like about the previous management? What is the success rate of each tenant? Are there any residential properties currently built in the area? What are the characteristics of the population or demographic profile in the area? It is also a good idea asking the cash flow statements from the sellers. Don’t be afraid to invest and research on commercial real estate properties, because it is really rewarding understanding the ins and outs of commercial real estate investments.

Do you have plans buying a commercial property this year? You might consider investing in your own commercial real estate property to balance your portfolio. There are really many benefits owning a commercial property that you cannot obtain by owning a residential property. Feel free to check our homepage or website if you want to learn more about real estate investments. Don’t limit what you can do for a great real estate investment.

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