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Thursday, 19 June 2014

The Difference between Residential and Commercial It’s a Jeff Adams Real Estate Seminar Tips

Residential

Residential tenants are available in spite of of the economic condition. This is because most people want to live and rent in places close to their friends, families, job location, and educational institutions.

Investing in rental homes also guarantee available cash flow and easier to rent. Even if a tenant leaves, there are always new tenants coming in.

Also, it is easy to sell houses than commercial lots because demand from buyers is always there.

House rentals are strong-minded by comparable market rates of similar houses in the area. Tenants pay their rents on a weekly or monthly basis depending on different countries.

Rental lease is quite standard, short and easy to understand. Landlords and tenants should not have difficulty in understanding these documents.

The problem with some residential tenants is that they don’t pay their rents on time. Besides, some won’t even leave when they are asked to.

Commercial

Commercial properties tend to be more profitable than residential because of steady returns and better cash flow. Tenants in commercial properties usually pay expenses such as repairs and maintenance. This is because tenants want to run their businesses as good as possible.

The lease period is longer than residential, which translates into guaranteed long-term cash flow. Landlords can lease to a tenant for an exact length of time (5 years) and then have the option exercised by the tenant to renew the lease for another period of 5 years.

The lease document itself is fairly long and contains many clauses. You need to study the lease carefully and understand the terms with the help of a capable lawyer.

Not like residential, leases are very important as these documents decide the price, value, and most importantly the rents of a commercial property. Tenants who have long-term leases can appreciably improve the value of the property.

When that happens, they leave and landlords need to find new tenants while covering the outgoing costs during vacancy for quite a long period. Therefore Vacancy rates for commercial property are higher.

Most banks are willing to loan more for the housing market but less on commercial market. When it comes to mortgages, residential and commercial loans are also diverse with various financing options catering for each type of speculation.

Therefore, investors need to have greater knowledge, experience, and enough cash reserves to invest in commercial properties because of higher risks. Commercial leases are also great when it comes to rent payments.