The distinctions between purchasing a home and investing in commercial real estate

It is natural to want the security and stability that real estate investments provide during times of economic instability. These investments are intrinsically tangible and resilient and offer owners a physical asset on which they can rely.

However, not all real estate investments are equal - and buying a home is not the same as investing in real estate! While both strategies may make financial sense, it is critical to understand the distinctions between buying a home and investing in commercial real estate (CRE) in order to select the best option for your circumstances. 

Buying a property can be profitable if done correctly!

Buying a home makes sense if you are in need of a place to live with your family. The answer is yes.

A residential property that you do not intend to sell, on the other hand, is only an investment if used sensibly. Buying a rental property, fixing-and-flipping properties for a profit, or renting out a portion of your home are all viable choices for successfully investing in residential real estate (i.e.: becoming an Airbnb host or renting out your garage).

If you intend to sell your home, it is merely an investment.

If you do not intend to buy a residential property to rent out or fix and flip, your home can only be a profitable investment if you decide to sell it. In this situation, increased real estate appreciation and exploding house prices can help you reap big rewards once you have acquired equity.

According to Zillow, property prices in the United States have risen by about 15% since last year. This means that if you bought your property in 2021 for $300,000, it might now be worth approximately $345,000. In turn, selling it today will bring you a return of $45,000.

To achieve a more realistic estimate, deduct interest, closing costs, and upkeep charges when computing your returns. 

Commercial real estate can rapidly increase your wealth.

One of the most significant financial advantages of the commercial real estate market is that CRE properties produce higher returns than residential properties while requiring less work.

Commercial properties also benefit from a significantly faster appreciation rate, which can help investors quickly develop equity and further grow their portfolios. In turn, if you are aiming to develop the foundations needed for long-term prosperity, investing in CRE or joining an investment group may be a better option than buying your own home.

CRE investments allow you to remain agile and ready to respond to evolving trends

The commercial real estate climate, like most other markets, has altered dramatically in recent years. Warehouses, storage spaces, multi-family complexes, and healthcare facilities are currently among the most profitable segments.

When compared to buying a single home, joining an investment group and purchasing a portion of a CRE asset can help you remain more flexible and robust to market changes.

CRE provides solid passive income and continuous cash flow

Purchasing a family home can help you move up the property ladder, improve your credit score, and net large profits when you sell it. Nonetheless, if your goal is to acquire a home to rent out part of it (i.e.: a spare room), you could not perceive the returns you want.

Indeed, your mortgage rate, rent pricing, and vacancy rates will all have an impact on your cash flow and passive income, making them unpredictable. Commercial real estate investments, such as multi-family buildings, on the other hand, can give you consistent passive income and profits.

If you are confused about the optimal investment approach for your needs, speaking with a qualified advisor can help you better understand the intricacies of commercial real estate investing.

You can contact us to get more choices