What Are the Main Differences Between Residential and Commercial Properties?
Most beginning investors probably already know the fact that there are commercial and residential real estate properties, both with their own unique qualities and scopes. While residential properties are designed for providing living quarters to tenants who, in turn, provide you with rent on a regular basis, commercial real estate properties can be more complex, as well as larger, more expensive and requiring more maintenance. Commercial properties are typically designed for businesses and large conglomerates that use them for retail or manufacturing, as well as offering accommodation, such as in the case of hotels and inns.
Commercial vs. Residential Real Estate for Investment Purposes
If you want to invest in real estate, the amount of money you have at your disposal will matter the most. Your capital can determine whether you can go into commercial real estate or stick with the cheaper option of buying one or more residential real estate properties and becoming a landlord. The main difference is that commercial properties involve larger expenses and purchase costs. Also, the set of rules governing residential real estate transactions can be quite similar from one property to the other. In contrast, commercial transactions are far more varied and complex, involving a different set of rules and requiring a lengthy study period, depending on whether you want to invest in a simple shop, or you’re looking to buy factories, retail centers or hotels.
The Different Parties Involved in the Transaction
The parties involved in residential and commercial real estate transactions can also differ greatly. For a residential transaction, you don’t even need to have your own company. You can simply buy residential properties as if you were buying additional homes for yourself. The parties involved are typically just the buyer, the seller and the tenant. With commercial real estate, it can differ greatly. The parties can include various companies and shareholders as well as their authorized representatives. Unlike with residential real estate transactions, these representatives might not even be the ones who make the decision of buying or selling the property, and the transaction could turn out to be lengthy and complicated in the end.