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Comparing residential and commercial property investing

On Behalf of | Nov 6, 2015 | Uncategorized

Kansas residents often consider putting their money into the real estate market because the returns can be high, but choosing between residential and commercial property investment opportunities can be difficult. Investing in residential real estate such as homes, apartments and condominiums generally requires less capital, but the profits associated with commercial properties like offices, stores and warehouses can be far higher. However, there are a number of other significant differences between the two types of property investment.

Real estate profits are achieved when a property is sold for more than its purchase price or when rents provide an income stream. Collecting rents from businesses is often easier than dealing with individuals or families, and evicting a company from commercial property for nonpayment of rent may be more straightforward and less emotional than throwing a family onto the street. Those considering leasing commercial real estate generally make their decisions based upon financial considerations and their behavior can be more more predictable than residential property buyers.

Vacancy rates are a particular concern for commercial property developers and investors, and financing for this type of real estate is sometimes difficult to obtain when tenants are hard to find. This is because loans for residential real estate are made based on the sales of similar properties rather than projected income streams. Residential properties may also be easier to maintain.

Commercial property developments and transactions can sometimes be made more challenging by legal issues. Disputes with contractors, land use or zoning issues and liens and bond claims can cause costly delays, but an attorney with experience in this area may be able to anticipate and prevent them. Some of the most contentious disputes arise from poorly written contracts, and attorneys may review these documents to identify and remove vague or contradictory language.