Both commercial and residential real estate can be a good investment for the right person. However, there are some differences in what you might get with each type of property. Here are some things to think about.
Business Clients Demand High Performance
One thing that you must be aware of with commercial real estate investments is that you will have clients who demand a high level of service. Every hour of downtime for power or plumbing issues can affect their business' reputation a lot. You may need to hire a property manager to deal with these clients appropriately. Also, the operating costs can be high, especially if you have a tenant who keeps lights, thermostats, or machines going at all hours of the day. Those high dollar rents come with a lot of expenses on your end; just make sure that you've done the math carefully to ensure you'll stay afloat.
Commercial Tenants Sign Long Leases
One of the upsides to buying commercial real estate to rent is that you will have less of a chance of vacancy. Commercial tenants may sign a five year lease or more, whereas you're lucky if you get a residential tenant to fulfill a yearlong lease in many cases. With residential properties, you might find yourself spending a lot more energy just to keep the place full.
You Can Do Fun Things with Residential Properties
On the other hand, it doesn't have to all be about the money. There are some interesting things that you can do with residential properties that may make being a residential landlord more interesting or rewarding. For example, you could try your hand at being a vacation rental landlord. With that, you can see enormous returns on your investment if you are successful. You could also use the residential space for yourself at times. And at other times, you can have a long-term tenant if you wish. Over the course of a single residential property, there is simply a lot of variety in the way you can manage the property.
These are just a few of the differences between managing residential and commercial properties as a landlord. It may help you to speak with real estate agents or brokers as well to discuss your price range and the things that appeal most to you, so that they can guide you towards properties that would work for you as an investment.