Commercial vs. Residential
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What type of investment property do you want to own?
There are numerous differences regarding the ownership and management of commercial vs. residential income properties. Some of the important differences are summarized in the table below. Pros and cons are generalities and do not apply to all properties or all the time.
Commercial |
Residential |
|
Pro |
Con |
Pro |
Con |
| Less regulation |
Locked into long-term leases |
Short-term leases |
More regulation, including lead paint, etc. |
| Great flexibility regarding lease terms |
More affected by economy |
Less affected by economy |
Lease terms restricted |
| Easier to get rid of tenants |
More complex lease required |
Simpler lease (much of landlord/tenant relationship defined by law) |
Eviction of tenants more difficult |
| Usually dealing with more knowledgeable tenants |
Environmental concerns |
Easier to finance or refinance |
Courts tend to favor tenants |
| Courts tend to favor landlord |
ADA requirements of concern even for existing properties |
x |
x |
| x |
Harder to finance or refinance |
x |
x |
For detailed discussions of the above differences and others, click here.
Now examine the pros and cons of a small number of a few large buildings vs. many small properties.
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