As I continue towards my goal to be financially independent within a few years (see my progress here), one direction that I intend to take is buying some real estate. I’ve explained some of the reasons why as well as a few of the benefits involved. This week, I took time to look into one critical decision I will be faced with when I do finally end up buying some real estate.:
Residential Or Commercial?
There are a lot of different benefits and downsides involved. The main ones that I was able to find:
-dealing with businesses can involve complex lease contracts that can be intimidating and require legal help
-higher down payments are generally required to get a mortgage/loan
-a lot more can be involved depending on the type of activity performed by the company
-can turn out to be more difficult to rent (while good residential ones will generally rent easily at the “right” price
-more difficult to deal with tenants as the landlord must work with many different laws
-process is much more straight forward. Why? I have rented before, know what’s involved, etc
-legislation often limits how prices can be increased every year making more difficult to run profits
-finding key tenants is critical: not only will it determine how reliable they will be in paying but also will take care of the property, hopefully live there for a few years, etc.
I will probably end up buying a condo to start things off. It will provide me with an easier way to become familiar with all of the different aspects of being a landlord. It will also require a smaller investment which is certainly significant. One reason is that I don’t want to invest a million dollars on one building to be lent out to 1 business. It would make me too dependent I’d much prefer to start off with something smaller and increase my investment by adding new units in different locations. This would provide me with a lot more diversification.
I know that some of you have generate income from real estate holdings, I’d love to hear what types you hold, and what kind of experiences you’ve had. I do know that I’d much prefer renting out at a slightly lower price to a very reliable person than trying to rent at the very top. It will certainly make for very interesting research…If you liked this post, you can consider subscribing to our free newsletters here