Real Estate Investment is a popular and sound investment option and a booming market that people from diverse sectors are taking into consideration. It is also an attractive and secure source of income for many. People invest in real estate as it enhances the investor’s risk-and-return profile portfolio.
Real Estate Investment refers to buying real estate properties as an investment to gain profit and create wealth. This includes investments made in both residential and commercial buildings. The four ways to do this are rentals, appreciation, ancillary investment income, and dividends from owning real estate investment trust shares. People invest in real estate as it generates steady cash flow, is a great revenue stream, and can easily leverage their investments.
The various types of real estate investment are private equity, publicly traded equity, private debt, and publicly traded debt. Some examples are office workspace, houses, agricultural land, commercial plots, and more.
What is commercial real estate and Residential real estate?
- Commercial Real Estate
Commercial real estate is any property that is used for business purposes like conducting daily business operations. The various commercial real estate property investments are hotels, businesses, office workspaces, retail spaces, public facilities, industries, and warehouses. These properties come in different shapes and sizes. The owner of such properties can use it for himself or rent it out partially or fully to tenants.
Commercial property investment offers numerous advantages like Higher ROI, Qualified Tenants, Low-maintenance costs, and Triple Net Lease.
- Residential Real Estate
Residential real estate is any property that is used solely for living purposes. It is the investment people make in property for personal use. It includes rented housing property that is not usually owner-occupied to generate income. These properties include homes and apartments like single-family houses, townhouses, and studios, and are used as multi-use spaces.
Residential property investment offers numerous advantages like Low Cost of Entry, Decreased Tenant Turnover, Lenient Laws, Easy to find tenants, and Small scale operation.
What is the difference between commercial real estate and residential real estate?
Though there are some similar characteristics between commercial and residential real estate, many factors differentiate them. Some of commercial vs residential property factors are:
- Risk and Volatility:
Residential real estate properties tend to have higher risks because of numerous factors like tenant changes, high maintenance and upkeep costs, and subsequently low return on investments. On the other hand, Commercial real estate properties have lower risks and offer a stable return on investments with long-term rentals.
Both types of investments require rental or leasing contracts before buying the property. However, residential real estate properties are usually signed up for short-term and are less complicated. Commercial real estate properties are signed up for long-term and are in-depth and complex.
- Return on Investment:
It is higher in commercial properties in comparison to residential properties. As commercial properties are leased out for a longer period, usually more than ten years, the property owner enjoys bulk ROI. The average ROI for residential property is 4-10%, while for commercial property is 6-12%.
For commercial property, the loan is granted to the business entity, and for residential property, the loan is granted to the individual property owner. As the commercial property is a business liability, it involves complex procedures and lengthy paperwork with various restrictions, penalties, and terms & conditions.
- Maintenance Costs:
As commercial property uses advanced machines and equipment, its maintenance costs are expensive. For residential property, the Maintenance costs are less due to its 24/7 service. It is one of the most common difference between residential and commercial property.
Why is commercial real estate a superior investment over residential?
Commercial real estate is a superior investment because of the substantial demand for commercial properties due to an expansion in the business sector. It offers several benefits over residential investment, making it a superior option. Here are some of the reasons that describe commercial property vs residential property investment:
- High Return on Investment:
The rental Return on investment is usually higher in commercial property than in residential property. Due to the long-term contracts and leases involved in commercial property, it is a secure and stable income revenue. With the increasing demand for commercial property, even a little investment, or partly investment in a property, will yield high ROI for investors.
- Low Tenant Turnover:
Unlike residential property tenants, commercial property tenants are stable and tend to last for ten or more years. Here the tenants are the businesses or the corporations who invest in properties for a long term to establish their business operations over a physical location.
They create a real estate investment that reflects their brand image and do not keep switching from one property to another as it decreases their company’s goodwill. Also, commercial properties come with contracts and escalation clauses to maintain tenant stability.
- Increased Property Value:
In residential investment, the property value is determined by its neighborhood properties and other characteristics, making it a lower-return value option. However, in commercial investment, the revenue generation by the particular property determines the overall property value.
If the commercial property is in the prime business location of the city, it will hold a high cash flow revenue, hence increasing the property’s value in the market. Also, if the tenant is a high business profile investor, the commercial value will automatically increase and generate higher revenues.
Commercial real estate investment is the most preferred and beneficial investment for businesses. Many contractors are offering commercial property for various business needs. If you are looking for a commercial property for investment, then Ambrosia Galaxy is the best investment property in Pune. This property provides flexible office workspaces for all business requirements.
Ambrosia Galaxy is a commercial project spread across an area of 200000 Sq-ft, providing the well-maintained commercial property with elite real-estate services. They offer premium plans to big investors and guarantee top-class architecture to stand out in the competition. Their commercial rental property investment is the most preferred option by big as well as small business organizations because of the benefits.
Choosing Ambrosia Galaxy as your commercial property partner will yield high revenues because of its prime location with the availability of all the modern amenities that make it an attractive investment prospect.