Real Estate is broadly classified into 4 types
- Commercial real estate
- Residential real estate
- Industrial real estate
- Land real estate
All the above four has their own pros & cons. For now, let’s only talk about the first two.
Commercial real estate:
The constructions which are built for the commercial purpose comes under this category. Some examples are
a) Retail buildings
b) Office buildings
c) Shopping malls
d) Apartments etc.
Residential Real Estate:
The constructions which are built for the residential purpose comes under this. Some examples are
a) Single House
b) Duplex House etc.
Though both are types of real estate and yield good returns, there are some areas where commercial real estate scores more marks than the residential real estate. Let’s see them one by one
- Strong returns :
It is obvious. You get great returns with the commercial property compared to residential property as these are taken for commercial purposes like offices, shops, warehouses etc.
- More Stable income :
Unlike residential property, commercial properties are taken a lease for more years. This will generate the stable income for all the years
- Hedge against Inflation :
It is the best part of a real estate. Even in Inflation also it will withstand. It has the record of outpacing inflation over a long period of time.
- Reduced risk :
If we consider overall factors, Commercial property tends to carry low risk compared with residential property.
- Tax benefits :
The commercial property provides you with generous tax benefits like depreciation allowances, building maintenance allowances etc.
- Excellent Appreciation :
Commercial property has a record of providing an excellent appreciation of asset value over time. It depends on several factors though.
Real estate investment itself is a better investment option irrespective of its type but each type has its own pros & cons. It depends on the individual to choose which type best suits him.