An expert gave advice on investing in commercial and residential real estate

Investing in real estate continues to be a popular way to protect and grow your finances. Nevertheless, when deciding whether to buy commercial or residential real estate, it is necessary to take into account their unique characteristics, possible level of income and associated risks. Private commercial real estate broker Gleb Kotov told Izvestia on December 18 about the difference in investments between commercial and residential real estate.

"Residential real estate brings about 5% per annum, while commercial real estate - from 10-20%. For comparison, the average payback of an apartment is about 20 years, while commercial real estate pays off in about 10 years," Kotov notes.

According to him, this is due to high rental prices in the field of offices and street trading, where tenants willingly pay more for convenient and lively locations. The average annual income from liquid commercial real estate is expected to be 10-12% p.a. after tax.

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Why this is happening and what to expect in the coming years

According to the specialist, the value of office real estate increases faster than the value of money loses its purchasing power. Price increases are always ahead of inflation and are closely related to the activity in the construction of facilities. For example, the price for an office with an area of 40-55 square meters is comparable to the price of a small apartment, but the income from renting office space is much higher.

In addition, residential real estate is easier to sell or rent, which makes it interesting for new investors. However, it is subject to inflation risks and requires tenant management, which can pose some challenges. Commercial real estate requires more significant financial investments, but offers long-term lease agreements (from 3 to 10 years), which provides a stable income and minimizes the risks of property damage, the expert explained.

"The choice between residential and commercial real estate depends on the investor's budget, goals and readiness for long-term management of his own capital. If striving for a stable income and good capitalization of the asset itself, commercial real estate is a better option," Kotov concluded.

Earlier, December 7, the General Director of the professional legal group AID, lawyer David Adams told "Izvestia" about the risks of buying a gift apartment. According to him, before buying an apartment, it is necessary to carefully check all documentation related to the property. In particular, this applies to the document on the basis of which the seller of your future apartment has obtained ownership of the apartment, and if it is a gift agreement, you should be wary.