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Denver Real Estate Expert Discusses Investing in Commercial vs. Residential Real Estate

February 8, 2017

Are you considering becoming a real estate investor? According to a Denver real estate expert at The Sherman Agency, one of the first decisions you have to make is whether you want to invest in commercial or residential properties. Which should you choose?

Making a Profit

If you invest in commercial real estate, you typically are buying a property that you can lease out to a local business so you can collect rent. If you buy residential real estate, you can either rent the property out to tenants, or you can flip it and resell it on the market for more than you paid. Whether you are able to successfully flip a property will depend on the market, so this is never a guarantee. Many investors prefer commercial real estate when it comes to making a profit because rents are typically much higher than they would be for a residential property.

Tenant Issues

Investors also prefer commercial property because there are usually far less tenant issues than there are for residential properties. Commercial property tenants are businesses, so they tend to keep the property in a fairly good condition so they can continue to operate out of it. They also want to keep customers coming in the front door, so appearance matters, and they will usually go above and beyond to ensure everything is kept tidy and in good shape. However, if you rent out a residential space, you may end up with messy or careless tenants that cause a lot of damage to your property.

Initial Investment

Although commercial property does have its advantages, one disadvantage is investors will need a much larger initial investment to buy commercial property than they would to buy residential property. Repairing issues on commercial property can also be more expensive since these buildings tend to be larger and require professional maintenance. It can also be more difficult to secure a loan to purchase commercial real estate than it is to get approval on a loan to buy residential real estate. Because of this, many first-time investors choose residential real estate so they can learn the ins and outs of real estate prior to making such a huge investment. See more pros and cons of investing in commercial real estate.

Hours of Operation

Tenants live at a residential property at all hours of the day, so you never know when you’ll get a phone call about a leaking roof or plumbing issue. However, businesses only operate for a certain number of hours a day. This means you probably won’t receive a late night emergency call from your commercial real estate tenant. Keep this in mind when determining what kind of property you want to invest in.

Do you have questions about commercial or residential real estate? Are you ready to start investing? Contact Denver commercial real estate experts at The Sherman Agency to learn about the various services we offer to customers in the Denver area! Call 303-572-8778 to speak to a member of our team today!