In India, real estate has always been considered a good investment option.Many people start out investing in residential real estate simply because they’re more usual to buying homes, but commercial real estate is completely different field. You need to understand the different rules and terms in the commercial market.
Residential vs. Commercial
Following are the differences between commercial and residential real estate investments.
- Commercial real estate is appreciated differently.The return from the commercial property is directly related to its usable square footage. This isn’t always the case with residential.
- Commercial property helps diversify risk.For example, if you own an apartment building and you lose one of your 10 tenants, you only lose one-tenth of the income for that property, instead of the entire rent as you would if you lost a tenant in a single-family house.
- Income is often greater with commercial real estate.The yield is often higher per square foot and on an initial investment starting points than it is in residential. If you lease or rent a multi-unit commercial property, you have more tenants to generate income than you do with a single residence.
- Commercial real estate leases are generally much longer than residential.This helps with the stability of your income.
- Commercial property is prized by the bank differently.You’ll have to to find a bank that works with commercial real estate and it’ll want a higher down payment than for residential property–usually 30 percent or more.
For those keen to invest in real estate, commercial properties are a feasible alternative to residential options. Buying commercial property holds good scope for both capital appreciation and regular income through monthly rentals. But do note that one needs financial abilities, sufficient market knowledge and longer holding power.