Residential or Commercial?

Question

All of my real estate experience over the past couple of years is in the residential side of the business. Lately, I have become interested in learning more about the commerical aspect.

I am looking for your thoughts on whether or not commercial real estate is a better move?

Joel Owens · Answer

I say YES only because I do commercial and do not mess with residential.

On a serious note I do see many investors who have done flips on the residential side or own a few rentals and they want to now "dip their toe" in the water to start doing commercial.

For many multifamily is something they understand from doing house rentals and that is where they want to start.If they feel more adventurous they will go for a different asset class (retail,warehouse,industrial,hotels,office,self storage,etc.)

There is opportunity everywhere.The key is making good decisions on properties so that starting out you do not create a money pit that stifles further investment opportunities.If you buy right the property will help you onto others but if you buy wrong it will stifle you and sometimes put you under.

Geof Greeneisen · Answer

Commercial is my preference.

Issues typically arise when people occupy real estate. Commercial, office/retail, is more of a 9-5 management proposition whereas residential/multi-fam. is more after hours. Commercial is driven by business decisions and is less emotional when dealing with issues. In Michigan evictions are 30 days for commercial vs 60 days or more for residential. Small office or retail leases are 3-5 years vs 1 year or less in residential making vacancy management easier. When we have an eviction, commercial tenants have been more collectible than residential.

However, in Michigan right now banks are slashing residential notes (70-90% reduction) but as of yet have not discounted commercial notes as drastically (30-50% reduction). Go where the deals are. We find residential irresistible right now due to the returns we are experiencing. But commercial is so much easier for us to operate.

Nathan Emmert · Answer

IMO, residential is more intuitive and thus why people start there.

The reason people go commercial is scalability.  You can invest $50,000 in residential and get $10,000 a year in returns... but if you had to invest $10,000,000... well, it's far easier to go with a few commercial sized deals versus 200 residential deals.

I am curious how people recommend approaching it though.  I am honestly not even sure where to start with learning about commercial spaces, warehousing, self storage, etc to know how to find or even evaluate a potential property.

Renae Bliss · Answer

Would you guys suggest starting out in Residential??

Account Closed · Answer

Commercial, especially apartment buildings, can take you to the next level. Take a look at my education page on my SmithSyndication website for links to free YouTube videos. It's a work-in-progress that I add a few videos each month. There are also free articles about various aspects of commercial investing.

Residential or Commercial?

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