Residential or commercial real estate ?

When investing in occupied walls, you have different classes of assets available to you: residential (houses, apartments, buildings) or business (commerce, activities, offices, hotels ...). You can invest in both categories, but generally everyone stays at home, residential investors do not invest in commercial real estate and vice versa. Let's see the differences.

Residential real estate

This therefore includes housing in the broad sense, it can be fully owned or co-owned, again investors do not mix.

Residential real estate has the big advantage of security since if the location is well chosen (student city, proximity to transport, employment pool, etc.), the occupancy rate or vacancy will be very low, and the demand will be high. France and its neighbors lack housing, so there is more demand than supply, it also helps to support rents.

In return, the return will be lower since the risk is lower (we will see the average returns observed in another article) than for professional real estate.

Another downside, the balance between lessor and tenant is more delicate, in the event of litigation or unpaid procedures can be long and costly.

Commercial real estate

The spectrum of corporate real estate assets is vast and less known to the general public.

It is however entirely possible to invest in occupied walls of company as a private individual, it is necessary beforehand to study the three parameters, seen in the previous articles, that are the location, the quality of the tenant and the quality of the lease.

Commercial real estate is proportionately more risky than residential, since the occupancy rate observed is potentially lower, the demand being lower, in the event of the tenant's departure you can be several months before finding a serious tenant. There are, however, exceptions for so-called "prime" locations in cities like Paris with prestigious tenants.

The asset being generally more risky, the investor in occupied walls wants the return (see article on the calculation of the return) to be higher to cover his risk. Another advantage is that the balance in the lease between the lessor and the lessee is relatively to the advantage of the former, with some exceptions. In particular, you have the possibility of rebilling the property tax, the co-ownership charges and your non-occupying owner insurance to your tenant.

We will study in another article the expected returns by asset class.