Commercial Real Estate Investing vs. Residential Real Estate Investing
What are the benefits of commercial real estate investing over commercial real estate investing?

Do you own only commercial real estate, or do you also own residential real estate?
[{"id": "guqosun", "text": "&gt; What are the benefits of commercial real estate investing over commercial real estate investing? \n\nMore hands off. If an outlet breaks in an industrial center, they get to fix it. If a garbage disposal blows out, they get the replace it, etc etc. \n\nAlso much, much easier to evict.", "replies": [], "depth": 1}, {"id": "guqovng", "text": "I own apartment buildings because I work in that field and am intimately familiar with the costs/cap rates/rents/vacancy rates/etc... I don't own any retail/office/industrial properties, but I wouldn't be opposed to it. It would have to be a good deal for me to do the due diligence on it though.", "replies": [{"id": "gur2rlf", "text": "What do you think will happen to the thousands of empty \"luxury\" units in LA? \n\nWill they hold out? With the homeless issue, the city is introducing a penalty for vacant units. Will this make an impact?", "replies": [], "depth": 2}], "depth": 1}, {"id": "guqpk21", "text": "For me, it is really about gross leasing versus net leasing. The more costs pushed onto the tenant, the more my real estate functions as a leveraged, inflation-protected bond and the less management overhead. The downside with nonresidential are longer vacancies (which is ideally balanced with longer leases) and TI allowance. That downside is a barrier to entry that keeps out less well-capitalized investors.", "replies": [{"id": "gurk2xx", "text": "Great answer", "replies": [{"id": "gusi8fu", "text": "Other big difference I\u2019ve noticed are shorter Amortization schedules on commercial loans are shorter leading to a lower cash on cash return. Not that that\u2019s a bad thing, but residential getting a 30 year amort is always going to beat a commercial on a 20 year amort.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "guqqtr3", "text": "Have a mix of both.\n\nCommercials are leased to bank, a Gym and a manufacturing unit. \n\nAdvantages: \n\n\\-Long term leases\n\n\\-Typically professional clients and terms\n\n\\-More concrete terms \n\n&amp;#x200B;\n\nDisadvantages:\n\n\\- you deal with team of lawyers \n\n\\- harder negotiation\n\n&amp;#x200B;\n\nWe typically build both types and sell the residential and lease the commercial.", "replies": [{"id": "gur17as", "text": "&gt; We typically build both types and sell the residential and lease the commercial.\n\nDo you do a two unit mixed use condo (first floor commercial unit and floors 2-N residential multifamily unit) ? Or do you only do single use builds?", "replies": [{"id": "gv2ib1u", "text": "in the last 1 year, thanks to a few single floor vacancies on multi-floor commercials, we had the opportunity / potential to do a residential. We chose not to. \n\nWanted to keep it as an expansion opportunity for the MNC bank in the bottom 3 floors and wait it out. It took 8 months, but it worked out.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gurh57o", "text": "Why are we lawyers a negative!!?? I\u2019m Pichaku faced", "replies": [{"id": "gusicvc", "text": "Not negative, but I also just spent 14k in lawyers fees on one of our lease negotiations so it\u2019s a real cost.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "guqrhvt", "text": "One benefit is HGTV doesn't have a series on flipping commercial properties.", "replies": [{"id": "guqrrmf", "text": "legit lol'd", "replies": [], "depth": 2}, {"id": "guqul69", "text": "they should, some of these people man.  I'd watch the shit out of that.", "replies": [{"id": "guqx6h9", "text": "The thought of an entire office building with grey vinyl plank flooring gives me nightmares.\n\nPlus the fact that the entire interior wouldn't have walls because you know - open concept.", "replies": [{"id": "gur32o4", "text": "I just want to see that \"wait what\" look when the soil sampling comes in for some trust fund kids trying to turn a gas station into an art gallery and they find out they have to scrape off a bunch of dump trucks of soil.\n\n\"Does this mean we need to cut the sky lights out of the budget?\"", "replies": [], "depth": 4}], "depth": 3}, {"id": "gurl2g9", "text": "It\u2019s tough to flip a commercial property unless you are able to significantly increase the NOI right after you acquire it (e.g. with a new tenant).  Otherwise, cap rates don\u2019t move that dramatically in such a short period of time.  Unless you can find a super unsophisticated property owner willing to sell to you at a 10% cap and they have no idea it\u2019s worth a 7% cap (or any other cap rate less than 10%), than you won\u2019t have much luck.  That said, *most* commercial property owners have a good idea of what their building is worth. \n\nSo if you buy a building for $5 million looking to flip it in a couple of months, you\u2019ll probably end up with a similar price less the transaction and legal costs times 2 (assuming no change in occupancy).", "replies": [{"id": "gurlgxp", "text": "I was joking ;)\n\nbut yeah caps don't matter for flips. You either change the rent roll or not", "replies": [], "depth": 4}, {"id": "gurr3eg", "text": "Yes, the key is to take a property with high vacancy or other risk, lease it up, and get it stabilized.\n\nI agree that it is not something you could do on the timescale of most TV production, but with streaming services able to stomach the timelines of documentary/movie production, it could work.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gur6v7m", "text": "He raises Crickets.  She harvests worm skins.  Their budget $300,000. - HGTV", "replies": [], "depth": 2}], "depth": 1}, {"id": "guqwfat", "text": "In commercial ownership, the tenant does not inherently hate you like on the residential side.", "replies": [{"id": "gutxstn", "text": "There are exceptions to this.", "replies": [], "depth": 2}, {"id": "guuki7l", "text": "They may not inherently hate you, but I know owners who do all they can to cultivate that hate.  It's all about building relationships.", "replies": [{"id": "guw4z3t", "text": "Just jokes", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "guqyz64", "text": "Read this book and you can learn a lot\n\n&amp;#x200B;\n\n[https://catchknives.com/](https://catchknives.com/)", "replies": [], "depth": 1}, {"id": "gur18df", "text": "Your house you are leasing out is either 100% occupied or 0 percent", "replies": [], "depth": 1}, {"id": "gure0vx", "text": "I have always been of the opinion that Residential is best suited for growing overall equity to strengthen your lending potential. Commercial is about cash flow. You can reverse them or blend them but I think that is what they are best suited for.", "replies": [], "depth": 1}, {"id": "gure5p8", "text": "I like the more hands off approach, shorter term approach of land development. Paper lots always seemed like a great money maker if you can cough up the initial capital", "replies": [], "depth": 1}, {"id": "gurhai0", "text": "I only do commercial. Deploy more equity in one shot. Longer leases, NNN insulation from inflation and property taxes here in TX. \n\nI like lawyers but love my warehouses too! 75k sq ft in DFW", "replies": [], "depth": 1}, {"id": "gurqdng", "text": "I am a commercial broker/investor, but I have to admit that I really like residential rentals.  I have commercial as well, but residential is a commodity that is easily leased.  \n\nA fairly priced residential unit in my area will lease IMMEDIATELY, which makes vacancy risk almost non-existent.  My commercial is much more hands off during lease term, but when it goes vacant you work you butt off to lease it.\n\nI despise vacancies.  In our area commercial tax assessments are so out of control, it makes sitting on an empty building EXTREMELY painful.", "replies": [{"id": "guty4yp", "text": "Best answer here yet.", "replies": [], "depth": 2}, {"id": "guugmva", "text": "How do you vet your tenants?", "replies": [{"id": "guuotzg", "text": "For A-B residential it\u2019s full background check etc.   For C rentals and below I basically run their name through the state criminal history search and verify employment.  On C and below in my area there is no reason to run credit because no one will pass.  I use my gut feel on every deal and I am usually right.  \n\nI consider lease up the most important part of my business because if you do that right you minimize problems later.  I would never outsource this part unless I got to 100+ units and even then I would probably still try to do it.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gurxfy9", "text": "*\"What are the benefits of commercial real estate investing over commercial real estate investing?\"*\n\nMy head hurts.", "replies": [], "depth": 1}, {"id": "gusb4v9", "text": "Scale. If I 2x my equity into a residential investment I might clear $100k. If I do that in a $1B commercial RE fund, it\u2019s $20M.", "replies": [], "depth": 1}, {"id": "gv2vqnk", "text": "I don't know but I read articles saying that the housing industry is booming. The pandemic ignited the boom as experts say it. Experts even predict that it will stay as is for the next three years. That positive potentiality is backed by the big population of millennials who are turning 30s. According to them, 30 up is the age of active investment. What do you think?", "replies": [], "depth": 1}, {"id": "hmiqisv", "text": "[Commercial real estate agents Toronto](https://omertainvestments.com/commercial-real-estate/) is defined as a property with five or more residential units or a property that is rented out for business rather than for personal use. Residential real estate is explained as a building with one to four units. Examples of this are single-family homes, townhomes, condos, mobile homes, and multiple buildings.  \nAdvantages of commercial real estate investing over commercial real estate investing.  \nHigher Returns, Qualified Tenants, Triple Net Leases, Longer Lease Terms, Easier To Increase Value.", "replies": [], "depth": 1}]