Investing in real estate always requires careful planning and research. Residential and commercial properties offer different challenges and advantages that investors need to be aware of before buying.
Commercial Investing
Residential property owners will often invest in commercial properties in order to diversify their portfolio. For investors who have yet to buy commercial property, it’s advised that goals, experience, and targets are kept in mind. Begin thinking about the type of commercial property you have in mind and how much rental income you desire to generate. Consider your options—renting out buildings to businesses versus buying land and reselling to a real estate developer for profit. It’s best to talk to local Phoenix commercial realtors who will be able to answer any and all of your questions, advice you on every decision, and steer you in the best direction.
Residential Investing
Residential investing has both its cons and pros. For instance, when property taxes surge, your profits are negatively impacted. On the upside, maintenance costs for rental homes are often much less expensive than those for commercial properties. Residential property is also easier to enter—obtain a loan, buy property, and rent out. You need to take into consideration the number of tenants you’d like to rent out to. Managing one tenant is easier than multiple, but once your single tenant moves out, you need to look for another one as soon as possible. Again, the best person to help you with these decisions is a residential realtor in Phoenix.
5 things you MUST do before investing in a residential property:
1. Market value in the area
2. Market rents in the area
3. Estimated cash on cash return for the asset with or without debt
4. Expertise in property management or have a property manager and leasing agent in mind
5. Detailed inspection to make sure your profit is not reduced by major capital and maintenance issues.
This is important because no matter the value of the asset you must always make sure you are calculating into an annual return on your investment on an annual basis you can live with while also ensuring you have not inherited a money pit because of poor due diligence or unsophisticated agent representation.
Which One is Right for You?
The option you go for will depend entirely on what you want, the amount of work you want to handle, and the time and attention you’re willing to devote into looking after the property. You’ll need to consider the risk you’re taking on as well.
At EIR we take an investors mindset because that’s who we are. We have invested our own money buying properties in Arizona, Texas, Nevada, and Georgia. We can help you execute the same strategy and create wealth for your family. For residential or commercial real estate investment consulting and advice, contact Everyday Investments Realty and speak to an expert today.