From an amateur to an experienced investor, everybody hesitates before deciding what type of property they should invest next in. In order to make a profitable decision, understanding the technical difference between the two types of properties is essential.

The primary and most obvious difference between commercial property and residential property is their use. Next, residential properties attract families and individuals whereas commercial properties attract businesses. Both types of properties have their pros and cons when it comes to investment.

We have listed some of them here to help you decide what real estate investment will suit you best:

Market Study

An extensive study of your target market can help you check if the location is preferable from an investment point of view. Consider the previous growth trends of the market to determine the future scope of investments there. You can also conduct region-specific market research if you want to invest in key markets across the country. The idea of a market study is to get to know the location of your potential investment better so that you make a wise and informed decision. 

Estimate Rate of Return

This is an important aspect when it comes to any type of investing. Do the required calculations in regard to your estimated rate of return to get an idea of what profit you can expect from the investment.

Generally, self-use properties provide limited profit as compared to commercial properties. You also get more lease value out of commercial properties because of longer lease terms.

If you are looking for a property to rent, investing in commercial real estate will be more beneficial.

Own Terms

Commercial properties are directly impacted by how much revenue they generate and hence, there is greater flexibility to increase the value of commercial properties than residential properties.