Look, choosing between residential and commercial property can be a serious headache. At least, it was for me when I was first trying to figure out where to put my money. I felt like I was standing in the middle of a real estate jungle, wondering if I should build a house or set up shop. So, if you’re here trying to figure out how to choose between residential and commercial property, buckle up. I’ve got your back.

What’s the Deal With These Properties, Anyway?

Okay, let’s break it down real simple.

Residential Property

Think of your standard house. Apartments, duplexes, townhomes, condos—basically, places where people live. If someone tells you, “I’m looking to buy a house,” they’re probably talking about residential property.

Commercial Property

Now, this is where things get funky. Commercial properties are designed for businesses. We’re talking office buildings, retail stores, and warehouses. Basically, anything that’s used for making money (other than your side hustle of collecting vintage beanie babies).

The Big Picture: Investment Goals

First things first, you need to ask yourself: What are you actually trying to do here? Are you looking to make quick cash or are you in this for the long haul? There’s a huge difference, and trust me, I’ve learned this the hard way.

Residential:

• Steady income from rent.
• Easier to sell and rent out.
• Lower entry cost (so no need to sell your organs for a down payment).

Commercial:

• Higher rental income, if you’re lucky.
• Longer leases.
• But, it’s like walking into a high-stakes poker game—sometimes you win big, sometimes you’re left with empty pockets.

So yeah, figuring out how to choose between residential and commercial property depends on your risk appetite. Do you want that consistent but modest rent from a small apartment? Or are you feeling lucky with the bigger bets that come with commercial property?

Let’s Talk Money: Budget and Financing

This is where it gets…well, interesting. If you’re wondering how to choose between residential and commercial property, then your wallet is gonna have some serious input. I remember when I first looked into commercial property. The sticker shock nearly gave me a heart attack. The initial investment? Oof. Let’s just say I considered a GoFundMe page.

Residential:

• Easier loans, lower interest rates.
• Generally a smaller down payment (yay, you don’t need to liquidate your savings account).

Commercial:

• Bigger down payments, longer approval times.
• Commercial loans are a whole different beast. Banks aren’t as keen to throw money at you unless you’re packing a serious punch.

It all comes down to what you can afford, and for most of us, how to choose between residential and commercial property means doing some serious math (yup, the “I’m an adult now” kind of math).

Risk: How Much Are You Willing to Gamble?

Risk is like a bad ex. It’s always there, looming, trying to mess things up. You need to ask yourself: how much risk am I willing to tolerate?

Residential:

• Fewer risks, because let’s face it—people always need a place to live.
• Your tenants probably won’t skip town, but…it could happen.

Commercial:

• More risk, especially if you’re leasing to businesses. If they bail on you? Say goodbye to that rent check.
• Economic downturns hit businesses harder, so your vacancy rates could spike if the market takes a dive.

I used to think commercial properties were the golden ticket. But my first foray into that world? A total dumpster fire. Fast forward past three failed attempts to lease out a strip mall, and now I know: a steady paycheck from tenants in a residential building is worth its weight in gold.

The Lowdown on Maintenance

Now, let’s talk maintenance. Because I’m not sure if you’ve realized this, but owning property isn’t just about collecting rent checks. You’ll have to, you know, maintain the place. Or hire someone to do it. Either way, it’s something you’ll have to deal with.

Residential:

• Fewer headaches.
• Lower maintenance costs, but still gotta patch that leaky roof sometimes.
• You’re likely to need a property manager for larger units, but it’s a less involved job.

Commercial:

• Larger properties usually mean more upkeep, and businesses aren’t shy about calling in the experts to complain about mold or lighting problems.
• But here’s the kicker: some leases (like NNN leases) pass the responsibility onto the tenants. So, less work for you—unless they don’t fix anything. Then, you’re still the bad guy.

Let’s just say, if I had a nickel for every time I had to replace a busted toilet handle, I’d be able to buy a commercial property in my wildest dreams.

Location, Location, Location

Alright, this one is a no-brainer. But let me tell you, my first commercial investment? It was in the middle of nowhere. I thought the location was “up and coming.” Spoiler alert: it wasn’t.

Residential:

• Focus on neighborhoods with good schools, low crime, and easy access to public transport.
• The location doesn’t have to be prime, but it needs to be livable.

Commercial:

• High traffic is key. You need customers to walk in.
• You want prime locations that can draw in businesses and customers. Think downtown areas, retail hubs, or business districts.

I still drive by that old, forgotten strip mall and shake my head. The only traffic it got was from confused drivers who took a wrong turn.

The Bottom Line: What’s Your Exit Strategy?

Let’s face it. Every real estate investor has an exit strategy in mind. Whether it’s flipping, renting, or something else, you need to have an idea of how you’re going to get out of the game.

Residential:

• Easier to sell to a family or individual.
• You can always turn it into a vacation rental if things get desperate.

Commercial:

• Harder to sell, especially if the market isn’t hot.
• More likely to sell to investors or larger corporations.

So yeah, if you’re asking yourself how to choose between residential and commercial property, think long and hard about how you’re going to leave when the time comes. Selling my first property? It was like pulling teeth—except less fun.

The Final Word

Fast forward past a few epic fails and a couple of “what was I thinking?” moments, and here’s the deal: choosing between residential and commercial property is all about what fits your goals and lifestyle.

My advice? Think about your budget, risk tolerance, and how much work you want to put in. I mean, one of my properties is a total dud, but I still hold on to it, hoping one day it’ll make me proud. Don’t make the same mistake I did, but hey, we all learn somehow. You’ll figure out how to choose between residential and commercial property based on what works best for you.

Good luck out there. And if you need a coffee after reading this, I totally get it.