In Brief
Residential Vs Commercial Real Estate Investment
There are various advantages and disadvantages of real estate investment. Most of people do not understand the differences between residential & commercial real estate they focus more on one realty investment. Let’s find out which investment is beneficial.
Real estate investment has come to become a necessity and a status symbol in the contemporary era. Henceforth, investing in real estate has become one of the most prioritized and complicated aspects of lifestyle. An individual who invests in real estate is commonly known as a real estate entrepreneur or a real estate investor. It refers to anyone who actively invests, purchases, rents, or leases a property in return for profit. Real estate investment involves several different types and here two of them namely, residential and commercial will be discussed. When invested properly, real estate can provide maximum profit at a very minute chance of risk.
Residential real estate involves any type of real estate where the property is on sale or rent for residential purposes. Flats, condos, vacation homes, etc. are all examples of residential real estate where people live. The landlord must manage everything from mortgage to renovations or hire a manager to take care of those aspects. The individual renting out the property must also keep in mind the factors involved in the profitable sale of the property. If the cost is too high for the offered services, it would probably attract fewer customers. On the contrary, if the property is undervalued then the owner is just leaving money on the table.
Commercial real estate investment refers to the concept where a property is rented or leased by a business. Office buildings and strip malls are good examples of this type of real estate. Industrial and retail real estate also fall under the category of commercial real estate. Industrial real estate involves property affiliated with the manufacturing of products like factories and warehouses. Retail real estate is where we find distributors selling the products. Commercial properties tend to have greater long-term profit for the owner and also command longer leases. The prices of management and maintenance also tend to be higher compared to residential properties.
Real estate investment has its advantages and disadvantages. It helps diversify assets, great inflation hedge, saves income tax, provides leverage, and so on. On the other hand, one must also look out for the disadvantages of real estate investors like the high cost of maintenance, and finding suitable tenants, the market price of the property may go down if the market condition isn’t doing well. This proves there are several factors involved in such investment which may not directly be linked to real estate but still has an effect on the business from the outside.
For example, if a person buys a residential property 3 BHK in Aerospace park Bangalore it will cost him 74.99 Lacs*-78.99 Lacs* after that he/she will get rent around 30,00/- to 35,.000/- so per year rent received around 4,20,000/- in addition to this rent is depend on many factors like nearby amenities, proximity to the major shopping malls, hospital, offices, etc. the rent is generally increased by 8 to 10 present per annum. The best investment option in Aerospace park Bangalore: Godrej Ananda 1/2/3 BHK Starts from 26.99 Lacs* Onwards
In the case of commercial property investment it will cost you around 5-6 Corers In a prime location can get you up to 15-20 Lacs* annual rent lease is fixed for a longer term, and there is no increment every year like in the case of a residential property. Also, the potential for upside in rent is limited since the rent is already at the higher end.
Commercial or residential, it is important to know that either way, one has to be very careful and consider several factors before investing as the profit may incline either way depending on aspects like market, convenience, purpose, location, and cost. Properties depending on their characteristics are favored by various set factors unique to the particular property. Therefore, it is difficult to categorize them into strict divisions, but they can be understood with the help of the most visible features and requirements of the tenants.