Commercial vs. Residential Real Estate Investing

Real estate investors tend to focus on either residential properties or commercial properties. It doesn’t have to be one or the other. Diversifying your investment portfolio is an excellent idea, and it will help you to understand how each type of property is different.

The Benefits of Commercial Property Investment
In the residential market, inventory is limited and prices are high. There aren’t a lot of residential homes to consider. With that market so tight right now, it’s a good idea to start thinking about commercial properties. You can find great deals if you know where to look and how to shop. When you work with a property management company like LAPMG that manages commercial spaces as well as residential, you can find some great opportunities. Our team has renovated a number of commercial properties that other investors might have overlooked. Whether a space needs simple aesthetic improvements or a complicated remodel, we can help.

Look for properties that are excellent for office spaces, warehouse tenants, or a combination of the two, which might be called a flex space. Don’t look for a single tenant building because that comes with a lot of risk. Multi-tenant commercial properties are better because you won’t have to rely on one rental payment every month.

Why Make a Commercial Investment
There’s often less liability when you invest in commercial properties. These are places where people work, not where they live. You won’t have to mediate fights between tenants who are also family members, and the maintenance costs will be lower. Most problems occur in kitchens and bathrooms, and those won’t be the focus of your commercial properties. You’ll also have more consistent rent. There are fewer late payments with commercial properties, and you won’t have to have a residential manager at the property, as you might with an apartment building. There are fewer government regulations, and it’s simply easier and less stressful to purchase and rent out a commercial space.

Commercial Property Financing
If you’re able to pay in cash for a commercial space, you’ll get a great discount. You can negotiate better. You can also convert your residential proceeds into a commercial investment. One of our property management clients sold a 12-unit building in Santa Monica for a great price. That money was invested into a commercial auto mall with repair shops and a major automotive retail chain as an anchor. This owner is earning a lot more capital and higher returns.

If you’re interested in hearing more about the commercial market, please contact us at Los Angeles Property Management Group. We’d be happy to help you grow your portfolio.