Investing in Real Estate? Why Residential Properties May Trump Business Real Estate
Thursday, February 19th, 2009
Benjamin DeBell asked:
The image of a real estate investor many people have is a landlord with many apartment buildings to his or her name, or a Donald Trump figure, with many hotel properties or commercial real estate under his or her belt. However, this stereotype only tells half the story. Many millionaire real estate investors are actually not moguls investing in business real estate, but ordinary people making large amounts of money by investing in residential properties.
If you’re new to real estate investing, you may wonder why investing in residential real estate makes more sense than investing in business properties. After all, don’t business properties make money because they are used in business? While that may be true, there are many advantages to investing in residential properties:
1) They are easier to finance. You likely already qualify for some type of mortgage. If you are buying a business property, you may need a business plan to show lenders that you can handle the loan, but with residential real estate you have your pick of lenders and mortgage options. Plus, many lenders can offer you better rates on residential real estate because this sort of real estate often carries fewer risks.
2) They offer more investment opportunities. You can hold onto these properties, flip them, lease them, rent them, sell them to investors or homebuyers, and even rent them with an option to buy. When you buy business or commercial real estate, in other words, your only target market is business professionals. When you buy residential real estate, however, your market is wide open since renters, homebuyers, and investors may be interested.
3) They have a larger markets. Not only can you sell or rent residential real estate to businesses and homebuyers or individuals, but you have more to choose from when it comes to residential real estate. Your local paper likely has thousands of properties listed on any given weekend. You simply have lots of choices, since everyone needs a place to live and residential properties are built everywhere.
Hazel
The image of a real estate investor many people have is a landlord with many apartment buildings to his or her name, or a Donald Trump figure, with many hotel properties or commercial real estate under his or her belt. However, this stereotype only tells half the story. Many millionaire real estate investors are actually not moguls investing in business real estate, but ordinary people making large amounts of money by investing in residential properties.
If you’re new to real estate investing, you may wonder why investing in residential real estate makes more sense than investing in business properties. After all, don’t business properties make money because they are used in business? While that may be true, there are many advantages to investing in residential properties:
1) They are easier to finance. You likely already qualify for some type of mortgage. If you are buying a business property, you may need a business plan to show lenders that you can handle the loan, but with residential real estate you have your pick of lenders and mortgage options. Plus, many lenders can offer you better rates on residential real estate because this sort of real estate often carries fewer risks.
2) They offer more investment opportunities. You can hold onto these properties, flip them, lease them, rent them, sell them to investors or homebuyers, and even rent them with an option to buy. When you buy business or commercial real estate, in other words, your only target market is business professionals. When you buy residential real estate, however, your market is wide open since renters, homebuyers, and investors may be interested.
3) They have a larger markets. Not only can you sell or rent residential real estate to businesses and homebuyers or individuals, but you have more to choose from when it comes to residential real estate. Your local paper likely has thousands of properties listed on any given weekend. You simply have lots of choices, since everyone needs a place to live and residential properties are built everywhere.
Hazel