Susan Ormont - RISK VERSUS REWARD: A SIMPLE GUIDE FOR INVESTING IN REAL ESTATE

Pro Tips: One trick of the trade for getting the best deals on residential rental properties is to purchase them during the offseason. Fewer people buy in the winter, so you’ll have less competition, and sellers might be more willing to negotiate.

COMMERCIAL VERSUS RESIDENTIAL PROPERTIES WITH MULTIPLE UNITS

A general rule of thumb in Massachusetts (which can vary by state) is that buildings with up to three units are residential, whereas a building with four or more units is considered commercial. Each type of property will be subject to different laws and taxes. Regardless of which type of property you use, you’ll still need to consider all the factors above. That said, there are differences to consider when choosing between commercial and residential properties. • Residential properties are usually rented for a year (no more than three), whereas commercial properties tend to have longer leases (up to nine years), meaning less turnover and therefore less risk of vacancy. While profits can be higher in single-family homes, it’s an eggs-in-one- basket situation, and vacancies can be especially detrimental. If a renter vacates, the place must be cleaned up and fixed, as necessary, then the owner needs to find new renters. This process can sometimes take two or three months, which might be equal to the amount of profit the owner could’ve made in two years, had the property been continually rented.

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