Real Estates are popular investments for most people. However before any investment is made, it is important to first research and study what you are planning to invest on. Possible sources on where to find investment properties are in multiple listing services, commercial information exchange, real estate agents, bank real estate-owned departments and public agencies, public auctions and private sales. These assets are comparatively more expensive than other forms of investments such as stocks and funds. Seldom are instances where a investor pays the total amount or price of the property in cash, so available financial terms or debts such as mortgage loans are used to finance the investment, where the collateral is the property itself. There are three possible types of real estates, residential and commercial.
Properties considered as residential are those that people could dwell and live in, such as single-family homes, multi-family houses, duplexes, condominiums, townhouse and apartment buildings. This also encompasses portable dwellings like boats, mobile house and houseboats. It s reasonable enough for investors to choose this type of real estate since a house or a home is one of our basic needs. No doubt everybody needs a adequate place to live and there is a great demand for more housing properties. Residential Properties usually have less costs and price. There are many banks and lenders who can help provide financing on this real estate type. From the view of these banks and financial services, should there be failure in re-paying the mortgages, they can easily get their money back since other investors are ready to buy the foreclosed property.
Residential properties have their own disadvantages as well. Housing estates need to be managed and maintained regularly. There is likely more repairs to be done which means additional outflow of cash. If the property is used as a form on income through leasing and no tenants are renting it, then there will be no income.
Whereas Commercial properties are places where business dealings and activities are held such as office buildings, industrial complexes, shopping centers/malls, stores and warehouses. Commercial real estates usually have higher rate of return than residential properties. There is consistent income and stability in the investment since there are long term leases offered. Tenants usually fix any damage and repairs on their own. Commercial property owners could have steady income as the value of the property increases. While the disadvantages of commercial real estates include: loans which are hard to obtain and a large amount of money is required up front, commercial spaces are often difficult to lease and can sometime remain vacant for long periods of time.
To cap it off, commercial properties are usually valued depending on the income calculation whilst residential properties make use of comparable properties for a possible approximation.
The investor should understand that whether it is a residential or commercial property, there are always risks involved. So it is important to take time in researching the property and give extra effort in familiarizing with it. The area where the property is situated must be thoroughly analyzed before going through on the investment. If there are particular complications, then sometimes may be better to consider another property to invest on.