5 Tips on Investing in Commercial, Residential Property

By: Amy Woods, August 6, 2015

To invest or not to invest. That is the question. Commercial property or residential property. That is another question. When deciding where to spend those hard-earned, well-intentioned dollars, it is wise to put it your money where your mouth is. Here are five suggestions on how to do just that.

What Is Your Objective?

Are you investing in real estate to get a great return and have your newly acquired asset grow in value? Or are you investing to upgrade from a smaller office or older home and expand your business or living space? The reasons one invests in property vary and can be convoluted unless the objective is clear and crystallized.

If you are happy with your brick-and-mortar status and don’t foresee any end-use of the real estate you are eyeing, it probably means you want to turn a quick buck – all good – in the form of leasing or renting.

Do You Have Enough Dough?

The key word here is corpus, which Merriam-Webster defines as “the main body or corporeal substance of a thing; specifically: the principal of a fund or estate as distinct from income or interest.”

Home loans usually are easily attainable, fairly affordable and readily manageable. Investors in residential property can obtain loans that cover up to 90 percent of the cost of the property, meaning they can get away with putting down as little as 10 percent. Commercial property is a completely different animal. In most instances, commercial property must be purchased outright with money from your own coffers and / or sources.

The reality of your budget will help in making the correct decision on which direction to go: commercial or residential.

What Do You Want from Your RIO?

Return on investment involving commercial property trumps that of residential property. For example, the industry standard of an approximate three-percent return on a home is toppled by an approximate six-percent or higher return on a commercial space. The level of appreciation varies depending on infrastructure, location and reputation of the developer.

You have to decide whether you’re in it for the long haul or are thinking shorter-term.

Determine the value of your home now with Free Values to see if it is the right investment for you.

Do You Want To Diversify?

Real-estate-industry experts will tell you diversification is a best practice. In other words, don’t put all your eggs in one basket. They also will tell you to be realistic about your finances and what you can and cannot afford.

This article is brought to you by FreeValues.com, the #1 provider of Free Real Estate Values on the web.