Investing involves many phases and many different types of properties. Knowing the differences is important to all new and experienced investors. The differences between residential and commercial properties will be explained in this article. The pros and the cons of both and how to begin your own business will be explained.

Commercial Properties Explained:

What is a commercial property?

According to Investopedia, "The term commercial property (also called investment or income property) refers to buildings or land intended to generate a profit, either from capital gain or rental income."

With commercial property, the type of property is different from residential investments. The types that are included are malls, office buildings,hotels, warehouses, farm land, garages and in certain states apartment buildings with a certain number of apartments would qualify as commercial property. For instance the Trump Towers in New York City is commercial property and not residential property.

Categories of commercial property:

There are four types of commercial properties:

1. Retail

2. Office

3. Industrial

Purchasing Commercial Property:

Purchasing commercial property is completely different from purchasing residential investments. This could cause great hardship to anyone purchasing commercial real estate through an inexperienced Broker. It is suggested that you go through a firm that specializes in commercial property only. Never trust your home and savings to an inexperienced agent.

In most commercial properties that are leased such as a restaurant, they will want you to secure a second trust deed. To explain to you everything about commercial sales, read this article:

http://www.helium.com/items/15 94698-understanding-commerial- real-estate-sales

What is a residential investment property:

Simply stated, it is real property held for non-personal use to make money from. Investing in ones future, could be a good example. But, as many invest in the future hoping for giant returns, they make many mistakes. With all the infomercials on how to become a millionaire without any money down, the general public became "starved" for real estate.

Now with 95% of the richest people in the world being involved in real estate what happened to the poor man on the street getting involved. The difference is money, experience and know how. The rich invested lots of money and got lucky. Well not really, they just used common sense and they used people to help them. A typical scenario is property for sale in Florida.

Many got flyers on how to make money on property in Florida using your VA loan benefits. So for no money down you could buy 4 homes and make a profit each month. These loan shark Realtors would promise the buyers that they would make a profit and the hitch was, the Realtor got to manage the property and charge a fee each month to the buyer. So the Realtor makes a commission on listing and selling the home and then gets a monthly fee to rent the homes and manage them. Now on top of that they need to be maintained, so the Realtors get to have their own maintenance team. See the problem here?

Now the Realtors are taking the mortgage payment and subtracting the rent received and the management fee and telling the buyers they have "positive cash flow" on their residential investment property. Stop! There are many other cost involved in handling investment property. Such as allowing for vacancies each year, property taxes, insurance, maintenance, repairs, and legal fees in case of bad tenants.

All these must be taken into consideration when buying residential property. Residential property can be a good thing. Read more on the subject of investing here:

http://www.helium.com/items/16 38742-how-to-tell-if-real-esta te-investing-is-right-for-you

Commercial and residential real estate is both investing and each has different tax breaks and brackets. Always check with your CPA or attorney concerning the pros and cons of investing as far as tax breaks are concerned. Most investors when selling property will turn around and invest that property into another property to avoid taxes, but seek advice to be positive.

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Learn more about this author, Barbi Trejo.
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