House Money Weekly
In this week’s House Money Weekly segment, Lauren and Alan get together with their special guest Michael Albaum. They discuss blog 146, Why Residential Beats Commercial Real Estate Investing. Alan wrote this blog because he finds residential being less risky than commercial. It also takes less money and can be more profitable. In this blog, there are 3 pros of residential investing. Number one is a 30-year fixed mortgage. With years of experience in real estate investing, Alan did a few commercial deals and it's much harder to get 30-year fixed mortgages on commercial deals. In commercial investing, you are constantly refinancing and you're trying to predict the future. Michael thinks that the 30-year mortgage is a super powerful tool to have but he also added that he doesn't think residential is for everybody. He shared that there are instances when using a different type of loan can make a ton of sense but if you are an average investor then it is one of the safest ways to purchase real estate. The 2nd pro of residential investing is that residential has lower down payments. You can buy a house for 0% down because it's your primary and then you turn it into a rental property and that is a great way to get started in real estate. You could also be unable to refinance later if your financial situation changes. Alan adds that if you're getting a commercial loan, they don't want you living in the property even if it's a 20-unit apartment building. There are limited ways you can work with commercials and that's why Alan personally loves residential. The hosts then discuss Private Mortgage Insurance (PMI), which is required for lower than 20% down. Note that there are interest rate breaks at different down payment percentages. The 3rd pro of residential investing is it is an investment that is more liquid and flexible. Who is buying commercial deals? Investors. Who's selling commercial deals? Investors. Who is buying residential deals? Investors and primary homeowners. So, in residential, you have a bigger buyer pool.
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