Residential Vs Commercial Property Investments

Before purchasing a new investment property, you should always consider the differences between residential and commercial real estate investments. Depending on your financial means, expectations and investment plan, you will have to decide which one can be more profitable for you. Most people will invest in residential properties, as this seems to be a safer endeavour requiring less money, however, if you have the means, commercial properties can be highly profitable. You should also consider that while traditional residential property investments might not have very high returns on your investment, repossessed or foreclosed properties, can bring you a net yield of up to 12-15%.

Property Types for Residential and Commercial Investments

Houses of four units or less, to rent to private tenants are usually considered residential properties. You can invest in buy-to-let residential properties, which means that you’ll get the rental yields every month, or purchase the property solely for future resale. Residential property investments vary from more traditional buy-to-let investments somewhere near your own home to investments in overseas real estate, below market value properties or foreclosed houses. Commercial properties are for businesses, and include a variety of properties, from apartment blocks and office buildings to hotels, restaurants, warehouses and industrial buildings, just to name a few. Managing a relatively small residential property is obviously simpler than managing commercial properties, where you will often need a professional real estate management company to assist you.

Researching the Real Estate Market

While you will always need some knowledge of the property market and current conditions to make a successful investment, residential properties are simpler to research and value. It is relatively easy to compare different residential properties, their prices and investment potential in a given area. Commercial properties, however, are often unique and require specialised knowledge to value accurately and to establish an investment plan.

Risks & Yields

Residential properties are generally regarded as low-risk investments. They also tend to cost much less than commercial properties and will thus be more affordable, especially if you’ve just started building up your investment portfolio. The relatively low risks and the low purchase price, however will also mean that your profits are lower, and your return on investment will come mainly from increases in capital value.

Commercial properties, on the other hand have higher risks, but also higher potential returns. The significantly higher prices will also mean, that for personal investors, only collective investment schemes are affordable for larger commercial property investments. The relative unpredictability of the commercial property market will also bring more risks. While residential property prices generally double every 10 years, this is not true for commercial properties. You can expect a net yield of up to 7-10% on commercial properties, which is higher than the net yield from traditional residential property investments, and a large part of your return on investment will be in the form of rental income.

Rental Properties

A successful investment plan for both commercial and residential properties is to rent them out. Residential leases tend to be much shorter, usually around one year, and private tenants are often considered less reliable than businesses. Landlords will be liable to pay for repairs, which might incur unexpected additional costs. Commercial properties, on the other hand, are leased out for a longer time, 5-10 years is not uncommon, and the yearly increase in rental yields will be more significant. Businesses are also often considered to be more reliable tenants and commercial tenants are generally required to pay for repairs. You should also consider that while commercial properties can bring you a secure and high rental income, it is also much more difficult to find commercial tenants.

Exit Strategy for Residential and Commercial Properties

One investment plan is to rent out your property as detailed above. However, property flipping, or future resale can also be a profitable strategy with both kinds of investments. Residential property can be sold quite simply to another investor or somebody who intends to occupy the house, and as long as the property is in a good condition and in a well-chosen location, you should generally be able to sell it at a significantly higher price than its original purchase value. Commercial properties can bring huge profits, but the process of resale is more complicated. The property must be sold to another investor or investor group, and it should have a successful and profitable record, to be attractive to the buyer for investment purposes.

Selling a Property Quickly With Commercial Property Agents

Selling commercial property is completely different to selling residential buildings. It’s important that you hire skilled commercial property agents to market and assist with the sale of your building. There are certain things that you can do to assist the agent.

Should I sell it Myself?

Some people will try to sell commercial properties personally without having to involve an agent. This seems like a brilliant idea because they will save money in commission fees. However, this may also mean that you won’t be able to sell the property for as much money as you will with an agent.

Selling a property yourself might appear to be a very good way of saving some money. The trouble is that it will actually take you much longer to sell. You will need to carefully advertise, promote and show people around the building. All of this is time consuming and can be difficult.

Selling Quicker with an Agent

If you find commercial property agents then you should be able to sell your property quicker. A commercial agent will also have a very good understanding of the market and how much your building is worth. This will mean that you can get the most money for your commercial unit.

The speed at which your property sells will depend on its condition. If the industrial unit is in poor cosmetic condition then it might be affecting your ability to sell it. Consider spending a few hundred dollars painting and renovating quickly. This will make it much simpler to sell.

Finding Commercial Agents

Residential real estate agents aren’t really suitable to sell commercial properties. You should find a specialist commercial estate agent as they will offer you a much better service. They will also have many more business contacts who might be interested in purchasing the property.

Finding commercial property agents is very simple. You can look on the internet, or browse through newspapers. When comparing the different agents available, you must ensure they will sell your property as quickly as possible. Take a look at their website to gauge how professional they are.

Most commercial properties are sold using websites these days. This only works well if the websites are professional and easy to use.

Cost

When you are choosing commercial property agents, it is very easy to only consider the cost. You might want to choose the cheapest agent available as this will save you money. However, the problem with choosing the cheapest is that it isn’t always the right move.

You need to find the best value commercial property agents for you and your property. Choosing a national agent will suit most business properties as then they can be sold to anyone out of the area.

By choosing the right industrial property agent, you will be able to sell your building as quickly as possible, at a price that pleases you. What’s more, the commission you have to pay won’t even be that high thanks to the higher selling price you will normally achieve.

Comparing Commercial Property Insurance Quotes Online

If you are in business it is more than likely that you either own, rent or lease some type of commercial property or premises in which to carry out the business activities.

The buildings and or premises contents will need insurance cover, however if you are just starting out in business it is unlikely that you are aware of either the costs of commercial property insurance or the types of policy and covers that are available.

In the past businesses tended to rely upon the services of a local commercial insurance agent or broker to advise upon property cover and research quotes.

Times have changed and today the Internet allows an individual business person to research online for commercial property cover and compare premiums at the click of a mouse.

There are many types of providers of this cover online from small insurance brokers offering specialist services and quotes from schemes through to large price comparison websites comparing quotes from multiple providers and direct commercial insurance companies offering their own products.

Within these groups of providers are various types of policy and package aimed at differing business premises and trades for which property insurance quotes are provided.

Office packages cover all businesses operating from offices, for both buildings and contents. Many offices are rented and the tenants can get quotes online to compare for just the contents property.

Commercial property insurance comparisons for landlords and let property are widely available online from comparison sites, insurers and brokers, for when buildings only cover is required by the owner.

Similarly with a shop package which covers buildings and contents insurance for all types of high street properties from shops to take-aways and restaurants, quotes can be obtained from all three sources online and for either building or contents risks combined, or alone.

Even those larger businesses that use the services of an intermediary due to the complex nature of their business, can easily compare commercial property insurance online to assert or not as the case may be, that their broker is providing the best deal.

Where a commercial enterprise does not fit a standard online property insurance quotation system, the business owner will need to complete a more comprehensive application which specifies the property risks they wish to insure.

This is known as a commercial combined property insurance policy and it is not possible due the multitude of various businesses that do not fit standard underwriting criteria, to compare quotes for these types of commercial property online.

As with all insurance it is a straight-forward process to search online and shop around for commercial property cover. When comparing prices and premiums online it is important to remember to compare the policy covers as well, as not all policies are the same.

If you are a small business owner with a turnover of under 2 million per annum and no more than fifty employees then the Internet can provide some of the best value quotes available in the current property insurance market.