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Renting out property you own is a great way to make your assets actually do some work for you. This is especially true in urban areas where space is always in demand, but there never seems to be enough of it to go around. For the typical landlord, there are two types of properties to consider renting out; residential and commercial. But which one is for you? They both have their pros and cons, and we’ll lay out a few of the basics here.

Residential

Residential properties are rented out with the intention that a person is going to live there. Of course, some types of businesses—notably small ones—are permissible in these types of spaces, but in general, the function of a residential property is to provide a place to eat, sleep and potentially raise a family at the end of a working day.

Pricing in residential properties is a straightforward process. The worth of the rent you can charge is entirely dependent on just two factors; condition and location. This makes it pretty easy to factor in any repairs or maintenance you need to conduct versus the profit you will actually make from tenants. However, because of the residential nature, leases tend to be shorter and the type of tenant you eventually play host to is unpredictable, which can sometimes result in damage or other incidents.

Commercial

Commercial properties are rented out on the basis that this is a place of business where some kind of work is going to be conducted. While condition of the structure is still an important determining factor, location may or may not be a consideration. Judging the overall worth of a commercial building and its rental potential is also a bit more complicated as many other factors come into play.

One of the things that varies wildly with how to price a commercial building is the possible use or intent of the building. A more conventional office building that will only have the usual electrical requirements is priced very differently from an industrial building which may work on large projects, use a lot of heavy industrial equipment and have very different needs in terms of space and power.

However, commercial buildings also enjoy more stability over a long period time, with longer, more reliable leases. If you’re looking for something that will largely take care of itself once the initial set up is complete, a commercial rental situation may be more to your liking.