How Residential properties are different from commercial properties?
There are various factors that determine the differences between residential and commercial real estate. They are:
- Cash Flow
- Property value
- Lease documents
- Knowledge of investor
Based on the factors above, let’s look at why residential and commercial properties:
- Residential tenants are available regardless of the economic condition. This is because most people want to live and rent in places close to their friends, families, job location, educational institutions, etc.
- Investing in rental homes also guarantees available cash flow and easier to rent. Even if a tenant leaves, there are always new tenants coming in.
- Furthermore, it is easy to sell houses than commercial lots because demand from buyers is always there.
- House rentals are determined by comparable market rates of similar houses in the area. Tenants pay their rents on a weekly or monthly basis depending on different countries.
- Commercial properties tend to be more lucrative than residential because of steady returns and better cash flow.
- Tenants in commercial properties usually pay expenses such as repairs and maintenance. This is because tenants want to run their businesses as good as possible.
- The lease periods are longer than residential, which translates into guaranteed long-term cash flow. Landlords can lease to a tenant for a specific length of time (e.g. 5 years) and then have the option exercised by the tenant to renew the lease for another period of 5 years.
- The lease document itself is quite long and contains many clauses. You need to study the lease carefully and understand the terms with the help of a competent lawyer.
What is Freehold Property?
Freehold property can be defined as any estate which is “free from hold” of any entity besides the owner.
Definition: Freehold property can be defined as any estate which is “free from hold” of any entity besides the owner. Hence, the owner of such an estate enjoys free ownership for perpetuity and can use the land for any purposes however in accordance with the local regulations. Sale of a freehold property does not require consent from the state and hence requires less paperwork, thus, making it more expensive than leasehold property.
Description: Freehold property is inheritable and there are no restrictions on the right of the property owner to further transfer the property. In a free hold property, there is no encumbrance to the absolute title of the property. A free hold is not akin to a condominium wherein the owner of the individual unit pays a maintenance charge. Free hold property can be inherited by a legal guardian. A freehold property can be transferred by registration of sale deed.
Source: Economics Times